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TRUE  CO-OPERATIVE  MARKETING 

Aaron  Sapiro,  Legal  Counsel  for  Wheat  Growers  Association,  Tells  Difference 
Betifeen  Rochdale,  oi   the  Co-Operative  Elevator  System  Now  Used 
in  Midwest  States,  and  the  True  Co-Operative  Plan.    Reprint- 
ed from  the  Journal  of  the  American  Bankers  Association. 


Agriculture  is  the  greatest  busi- 
ness in  America,  but  it  is  conducted 
with  the  least  efficiency  of  all  com- 
mercial activities. 

In  no  line  of  industry  is  there  so 
little  coordination  as  in  the  market- 
ing of  farm  products.  As  a  class, 
the  farmers  have  seen  commerce 
progress  broadly  in  the  last  genera- 
tion in  every  line  —  grading,  field 
and  character  of  distribution,  crea- 
tion of  demand,  proper  packing,  mar- 
keting and  credits;  but  the  sale  of 
farm  products  by  the  farmer  himself 
has  hardly  changed  in  any  important 
particular  in  all  these  years. 

The    farmer    sells    his    products    to 

buyers  and  does  not  understand  how 

the  price   is   made   or   why   it  varies 

from  season   to   season   or  from   day 

to  day  within  the  season.     He  takes 

what  is  offered;  and  he  is  helpless  to 

change,  it,  or  even   to  understand  it. 

Dumping  an  Evil 

The  farmer  borrows  money  on  his 

farm   and    on    its   products.     Neither 

the    farmer    nor    the    banker    knows 

B  what   the    collateral    is    really   worth. 

\      %  They  do  not  know  when   some  out- 

*  side    action    may    destroy    the    loan 

value  of  the  commodity;  and  by  such 

destruction,   also   lower   the   value   of 

the  land  and  its  value  as  security. 

The  farmers  of  America,  generally 
speaking,  dump  their  products  on  the 
markets  of  the  world.  Last  fall,  when 
the  price  of  cotton  was  sliding  down, 
hundreds  of  thousands  of  farmers  all 
over  the  country  began  to  fear  that 
thej'   would    be    left    with   cotton    on 
their  hands.     They  brought  their  cot- 
ton  into  th"   local   markets   in   quan- 
tities, far   greater   than    the   commer- 
cif,:' V. otin  (.c-j"<i  p-    ":tly  absort  at  a" 
fair  price.     The  buyers  were  literally 
;    swamped  with  cotton.  Naturally,  they 
did    not    offer    the    highest    possible 
price  when  the  growers  were  urging 
"them  to  take  the  cotton  at  any  price, 
so  long  as  they  would  take  it.     The 
price    began  'to    slide    more    rapidly. 
^    The  growers  broke  the  price  of  cot- 


ton by  dumping  cotton  against  cotton 
at  a  time  when  the  world  markets 
could  not  absorb  any  large  quantity 
of   cotton. 

Unquestionably  the^rice  of  cotton 
would  have  come  down  from  its  top 
level.  The  extent  of  the  decline  from 
approximately  43  cents  to  11  cents, 
and'  the  rapidity  of  the  decline,  are 
the  results  of  dumping  by  the  grow- 
ers. Manipulation  by  the  speculative 
interests  in  cotton  had  far  less  to  do 
with  the  collapse  of  the  cotton  mar- 
ket than  the  action  of  the  farmers 
themselves  in  dumping  cotton  by  the 
hundreds  of  thousands  of  bales,  with- 
out any  orderly  or  intelligent  market- 
ing program. 

In  the  sale  of  manufactured  prod- 
ucts, the  usual  commercial  procedure 
is  to  merchandise  the  products,  to 
move  the  commodities  in  a  sane  and 
orderly  way  into  any  of  the  markets 
of  the  world  that  will  absorb  them  at 
a  price,  fair  under  current  commer- 
cial and  credit  conditions. 

This  is  the  exact  opposite  to  a  sys- 
tem of  dumping  products. 

The  leaders  of  the  comrhercial  in- 
terests of  this  country  have  failed  to 
develop  the  marketing  of  farm  prod- 
ucts along  the  line  of  intelligent  mer- 
chandising, although  they  have  intro- 
duced this  system  into  the  handling 
of  all  other  products  throughout  the 
world. 

In  all  industrial  production,  the 
world  is  committed  to  the  policy  of 
group  production  (embodied  in  the 
factory  system).  Group  production 
demands  group  capital  and  involves 
group  marketing.  This  in  turn  per- 
mits the  merchandising  of  the  manu- 
factured products. 

In  order  to  enable  industry  to  carry 
out  this  program  of  group  production 
throueh  erouo  canital.  reslilting  in 
group  marketing,  the  various  states 
have  created  the  corporation,  as  an 
artificial  entity,  which  can  act  like  an 
individual,  sue  and  be  sued,  exercise 
distinct  legal  powers,  and  possess  def- 
inite legal  rights,  all  in  the  interests 


920805 


:    f 


of  great  commercial  progress. 
Individual  Production 

On  the  other  hand,  agriculture  is 
characterized  by  individual  produc- 
tion. We  not  only  recognize  this  sys- 
tem of  individual  production  as  a 
fact,  but  we  universally  deplore  the 
system  of  tenantry  which  dilutes  the 
individual  system,  tainted  by  a  rem- 
nant of  feudalism.  Economists  en- 
courage the  development  of  small 
farms  owned  and  operated  by  the 
farmer  residing  thereon. 

Agriculture  is  essentially  a  matter 
of  individual  production.  Agricultural 
products,  however,  cannot  be  intelli- 
gently sold  without  regard  to  what 
the  other  man  has  raised;  the  general 
production  and  condition  of  that 
product;  power  of  absorption  in  the 
domestic  and  foreign  markets;  gen- 
eral trading  and  credit  conditions. 

The  marketing  of  farm  products  is 
a  group  problem.  The  farmer,  in 
order  to  merchandise  his  products  in- 
telligently, must  act  with  other  farm- 
ers as  a  group. 

With  individual  production  and 
group  marketing,  cooperation  is  the 
one  means  to  accomplish  for  agricul- 
ture what  the  corporation  has  done 
for  other  industries. 


In  California,  where  cooper- 
ative marketing  has  been  most 
successful,  financing  of  farm- 
er~,  ""id  c^rrv  •rr'!  is  done  alrT  ct  t 
entirely  through  local  baniceis 
or  correspondents.  The  ciop 
mortgage  is  rapidly  disappear- 
ing and  funds  are  provided 
through  promissory  notes,  se- 
rial promissory  notes,  bankers' 
acceptances  or  drafts  drawn 
by  growers  and  accepted  by 
the  cooperative  o'-ganizations 
against  non-perishable  products 
stored  in  public  warehouses. 
The  California  plan  as  it  now 
functions  shows  that  it  is  un- 
necessary for  farmers  to  estab- 
lish their  own  financial  machin- 
ery, when,  through  proper  or- 
ganization it  has  been  proven 
that  banking  methods  need  not 
be  upset  or  a  new  financing 
medium  found.  Successful  co- 
operative marketing  is  the  re- 
sult of  cooperation  between, 
growers,  bankers,  editors,  edu- 
cators and  other  leaders. 


What     is     cooperative     marketing? 
?here  have  been  so  many  false  and 


unbusinesslike  attempts  at  coopera- 
tive marketing  that  it  is  difficult  to 
define  the  term.  Cooperative  mar- 
keting is  not  a  patent  medicine  or 
cure-all  for  the  ills  of  the  farmer.  It 
is  a  scientific  system,  designed  to 
minimize  speculation  and  waste  and 
to  merchandise  the  products  of  the 
farm. 

The  aim  of  cooperative  marketing 
is  the  sane  and  orderly  marketing  of 
farm  products  without  unnecessary 
internal  competition  and  with  an 
equal  return  to  every  grower  for  the 
same  quantity,  quality  and  grade  of 
product. 

The  method  must  depend,  first 
upon  the  legal  frame-work,  which 
varies  according  to  the  laws  of  the 
state,  and  second,  upon  the  character 
of  the  commodity. 

One  method  may  be  perfect  for 
perishable  products  and  fail  com- 
pletely with  a  non-perishable  product. 
With  perishable  products,  such  as 
fruits,  there  is  great  variation  in  pack- 
ing and  grading;  and  also  need  for 
immediate  and  rapid  care  of  the  fmit 
Therefore,  local  packing  houses  are 
justified  for  receiving  and  grading  the 
product.  A  centralized  marketing  or 
distributing  system  must,  however,  be 
created  as  the  selling  machine. 

With  perishable  products,  the  chief 
problem  is  routing,  so  that  the  vari- 
ous consuming  markets  may  receive 
all  that  they  can  absorb  at  a  fair  price, 
without  periodic  gluts  and  famines. 

With  non-perishable  products,  a 
highly  centralized  system  has  proved 
most  successful,  where  all  growers 
deliver  the  specific  product  to  one 
association.  The  central  association 
takes  title  to  the  commodity;  then 
grades,  pools  and  markets  the  prod- 
uct through  one  central  office. 

With  non-perishables,  the  primary 
problem  is  storing,  financing,  and 
gradual  distribution  so  that  the  mar- 
kets will  have  a  sufficiency  at  all 
months  of  the  year,  without  allowing 
stocks  to  be  piled  up  by  speculative 
dealers  for  manipulative  purposes. 

With  perishable  products,  an  agenc^ir 
contract  may  be  -  ^fcient;  with  non- 
perishable  products,  title  should  pass 
CO  the  central  association  under  the 
pale  and  resale  contract  to  permit  the 
use  of  the  commodity  as  bank  col- 
lateral. 

Different  methods  must  be  applied 
to  products  which  can  be  harvested, 
packed  and  shipped  every  month  of 
the  year,  such  as  oranges,  and  prod- 
ucts  that   are   harvested  once  a  year 


but  are  put  into  consuming  use  all 
through  the  year.  This  is  one  of  the 
marketing  differences  between  eggs 
and  wheat. 

The  same  method  cannot  be  applied 
to  a  product  which  is  sold  to  the  con- 
sumer in  the  same  form  in  which  it 
leaves  the  producer  and  to  products 
in  which  a  manufacturing  or  other 
process  intervenes  between  producer 
and  user. 

The  method  may  further  depend 
upon  points  of  competition  within  the 
United  States  or  in  foreign  markets; 
or  it  may  depend  upon  the  necessity 
for  localized  distribution.  Organiza- 
tions for  handling  milk  must  be  built 
around  a  main  city  center  which  needs 
a  steady  and  sufficient  supply  of 
whole  milk.  But  for  the  handling  of 
the  surplus  milk  in  manufactured 
form,  such  as  butter  and  cheese,  local 
associations  are  insufficient  and  must 
federate  with  associations  supplying 
other  localities  for  the  intelligent 
marketing  of  the  milk  products. 
Experts  Needed 

Cooperative  marketing  associations 
must  be  correct  in  their  operations. 
They  are  sure  to  fail  if  they  have  the 
wrong  aim  or  the  wrong  method. 
But  with  the  right  aim  and  the  best 
methods,  they  are  also  sure  to  fail  if 
they  disregard  the  need  for  experi- 
enced and  broad-gauged  men  to  con- 
duct the  business;  or  ignore  the  me- 
chanics of  operation  that  parallel  mod- 
ern   commercial   and  banking  methods. 

There  have  been  more  failures  than 
successes  with  coop'erative  marketing 
efforts  in  the  United  States.  Many 
of  these  failures  were  due  to  wrong 
aim.  The  alleged  cooperative  ele- 
vators throughout  the  Middle  West 
failed  to  merchandise  wheat  because 
they  were  organized  from  the  wrong 
standpoint,  and  have  hardly  yet 
learned  what  merchandising  means. 

But  more  failures  have  been  due  to 
management  by  men  who  do  not  un- 
derstand the  technique  of  coopera- 
tion; who  have  had  no  previous  ex- 
perience in  the  marketing  or  mer- 
chandising of  products;  or  who  pl&ce 
their  own  personal  ambition  as  a  lim- 
itation on  the  enterprise;  or  who  ad- 
vance methods  which  involve  class 
war  instead  of  coordination  of  all  ele- 
ments of  the  community. 

There  is  necessity  for  careful  study 
by  experts  of  the  particular  com- 
modity and  of  all  the  commercial  con- 
ditions affecting  it  before  any  specific 
plan  can  ever  be  recommended  as 
the  right  method  of  cooperative  mar- 


keting for  any  particular  farm  prod- 
uct. 

A  vast  body  of  experience  serves 
to  guide  and  to  provide  precedents 
for  the  proper  methods  and  opera- 
tions of  cooperative  marketing  asso- 
ciations. The  movement  is  found  in 
every  civilized  country  in  the  world. 

In  the  United  States,  the  move- 
ment has  been  most  successful  on  the 
Pacific  Coast.  In  California  alone, 
there  are  about  80,000  farmers  or- 
ganized into  cooperative  marketing 
associations,  each  built  around  a  par- 
ticular commodity,  handling  an  aggre- 
gate of  over  $250,000,000  worth  of 
farm  products  annually. 

These  associations  cover  perishable 
products,  such  as  strawberries,  pears, 
grapes,  apples,  oranges,  lemons,  milk 
and  eggs;  semi-perishable  products, 
such  as  potatoes  and  storage  eggs; 
relatively  non-perishable  products 
such  as  prunes,  raisins,  dried  peaches 
and  apricots;  non-perishable  products 
such  as  walnuts,  almonds,  small  beans, 
lima  beans,  canned  fruits,  baled  al- 
falfa, bottled  honey,  and  grains. 

The  experience  of  California  covers 
a  period  ranging  from  twenty-five  to 
three  years  in  the  various  associations, 
in  all  phases  of  cooperative  market- 
ing— receiving,  grading,  packing,  pro- 
cessing, standardizing,  storing,  adver- 
tising, marketing  and-  financing  these 
various  types  of  crops,  each  with  its 
own  peculiar  difficulties. 

The  California  experience  is  suffi- 
ciently broad  to  permit  a  basic  analy- 
sis of  the  reasons  for  failure  of  many 
specific  variety,  grade  and  quality 
cooperative  efforts  and  for  the  suc- 
cess of  the  surviving  enterprises. 

It  is  safe  to  assume  that  associa- 
tions, which  had  at  least  three  years 
of  successful  opeiation  under  varied 
commercial  conditions,  while  prices 
were  going  up  as  well  as  on  the 
down  grade,  under  liberal  credit  con- 
ditions, and  under  financial  stringen- 
cy, justify  critical  analysis  to  discover 
the  fundamental  things  which  should 
be  copied  in  setting  up  any  coopera- 
tive enterprise.  Such  an  analysis  of 
the  successful  cooperative  associa- 
tions in  California  indicates  the  fol- 
lowing essential  principles  as  to 
methods  and  activities: 

Pooling  Resources 

(1)  Cooperative  marketing  associa- 
tions must  be  organized  to  sell  by  the 
commodity  and  not  by  the  locality. 
The  man  who  buys  a  product  does 
not  care  where  it  comes  from;  he  is 


interested  only  in  a  commodity  of  a 
certain  variety,  type  and  grade.  He 
does  not  want  wheat  from  Lamed, 
Kansas,  or  from  Hutchinson,  Kan- 
sas, or  from  Wichita,  Kansas;  he 
wants  No.  1  hard  winter  wheat  of  a 
The  purchaser  of  agricultural  prod- 
ucts does  not  buy  geography;  he  buys 
a  commodity. 

Locality  is  a  problem  of  production. 
The  commodity  is  the  problem  of 
marketing.  In  handling  perishables, 
an  association  may  be  organized  into 
locals  for  receiving  and  grading;  but 
the  locals  must  federate  into  a  central 
agency  for  selling. 

With  non-perishables,  it  is  J.dvis- 
able  to  organize  the  commodity  into 
one  association  within  the  practical 
limits  of  each  state,  and  then  federate 
state  organizations,  if  the  product  is 
raised  on  a  national  scale. 

State  lines  should  usually  be  ob- 
served. St^te  laws  differ,  enforce- 
ability of  contracts  may  be  affected; 
banking  methods  and  customs  may 
differ.  From  the  standpoint  of  ease 
of  management  and  recognition  of 
practical  difficulties  as  well  as  senti- 
ment, the  state  is  usually  considered 
the  limit  of  organization  for  any  com- 
modity. The  national  marketing 
problem  is  then  solved  by  federa- 
tion of  state  associations  handling 
that  particular  commodity. 

Fundamentally,  it  is  impossible  to 
merchandise  a  farm  product  unless 
the  organization  is  built  from  the 
commodity  viewpoint  and  not  the  lo- 
cality viewpoint.  Throughout  the 
Middle  West  there  are  thousands  of 
grain  elevators  which  call  themselves 
cooperative,  built  on  the  Rochdale 
plan,  handling  the  grain  from  their 
neighboring  localities  on  a  method 
which  is  exactly  the  contrary  to  real 
cooperation.  The  Rochdale  sys- 
tem, as  developed  in  England,  ap- 
pears to  be  successful  for  handling 
consumers'  cooperative  problems.  It 
is  necessarily  localized  and  necessar- 
ily works  on  the  basis  of  patronage 
dividends.  It  is,  however,  exactly  the 
wrong  system  to  apply  in  farmers' 
marketing  problems.  It  is  impossible 
to  merchandise  a  farm  product 
through  localized  Rochdale  elevators. 
Each  one  of  the  local  elevators  be- 
comes a  competitor  against  every 
other  local  elevator.  There  is  no  co- 
ordination and  no  general  selling 
plan.  The  marketing  of  grain  through 
local  elevators  is  very  little  better 
than  the  marketing  of  grain  by  the 
individual  farmers.  Both  systems  ab- 
solutely     prevent     a     merchandising 


program  and  thus  defeat  the  primary 
aim  of  intelligent  cooperative  mar- 
keting. 

Successful  cooperative  marketing 
associations  must  be  organized  to  sell 
by  the  commodity  and  not  by  the  lo- 
cality. Of  course  this  commodity 
viewpoint  must  be  colored  by  the 
specific  practical  problems  of  that 
commodity.  Milk  cannot  be  organ- 
ized like  cotton;  wheat  cannot  be  or- 
ganized like  oranges.  But  in  every 
single  instance,  the  commodity  view- 
point instead  of  the  locality  viewpoint 
must  be  dominant  or  the  enterprise 
may  fasten  the  pockets  of  selfish  pro- 
moters, but  it  can  never  serve  to 
lighten  the  burden  of  the  farmer. 

(2)  Successful  cooperative  market- 
ing associations  must  be  organized  by 
and  for  farmers  only.  A  landlord  or 
lessor  who  receives  all  or  part  of  his 
rental  in  crops  qualifies  as  a  farmer. 
They  must,  however,  exclude  politi- 
cians and  promoters.  They  must  in- 
clude only  men  who  have  an  abso- 
lutely similar  problem,  and  therefore 
a  unity  of  viewpoint. 

Cooperative  marketing  is  an  eco- 
nomic remedy  for  economic  ills.  Po- 
litical remedies  for  economic  ills  are 
a  snare  and  a  delusion.  These  associ- 
ations must  be  kept  free  of  politics 
and  untried  theories. 

(3)  Cooperative  marketing  associ- 
ations must  be  established  along  def- 
inite business  lines.  The  associations 
do  not  need  capital.  They  are  organ- 
ized to  market  product.  They  must 
therefore  have  the  certainty  of  prod- 
ucts to  market.  Thi?  depends  upon 
contracts.  The  basis  of  successful  co- 
operative marketing  is  the  contract 
with  the  grower.  These  contracts,  as 
developed  in  California,  usually  pro- 
vide that  the  grower  must  deliver  his 
specific  product,  such  as  prunes,  to 
the   association   for  a  term  of  years. 

One-year  contracts  or  contracts  with 
an  annual  right  of  withdrawal  are  de- 
manded by  the  laws  of  a  few  states. 
These  contracts  are  generally  defens- 
ible only  when  the  association  has 
had  a  long  prior  experience  of  suc- 
cess, and  has  therefore  eliminated  the 
speculative  competitor. 

With  new  associations,  a  long-term 
contract  is  essential.  These  contracts 
may  range  from  three  to  fifteen  years, 
under  California  experience.  The 
long  term  gives  an  opportunity  to 
engage  able  met^  and  make  good 
commercial  connections.  No  great 
business  can  be  built  on  a  one-year 
basis.  It  is  practically  impossible  to 
engage  men  who  are  already  in  good 


^positions;  or  to  >work  up  a  new  mar- 
'^keting  demand  or  new  selling  connec- 
tions or  new   credit  methods,  except 
over  a  term  of  j-^ears. 

The  contract  between  the  grower 
and  the  association  should  be  abso- 
lutely tight.  A  rope  of  sand  is  use- 
less. The  California  associations  tie 
the  growers  with  ropes  of  steel  that 
have  been  tested  in  the  courts  and 
have  been  almost  universally  ap- 
proved. The  contract  should  contain 
careful  provisions  to  prevent  breach; 
and  these  provisions  should  anticipate 
not  merely  liquidated  damages  but 
the  enforced  delivery  of  the  product 
through  equitable  remedies. 

The  Conditional  Minimum 

In  many  of  the  California  contracts 
a  conditional  minimum  is  provided, 
without  which  none  of  the  contracts 
go  into  effect.  With  the  prune  asso- 
ciation, no  contract  was  effective  un- 
less the  contracts  were  signed  by  75 
per  cent  of  the  total  production  of 
California.  This  provision  for  a  guar- 
anteed minimum  is  a  unique  Califor- 
nia development,  exactly  correspond- 
ing to  the  demand  for  the  subscrip- 
tion of  a  certain  amount  of  money  to 
the  capital  stock  of  a  bank  before  it 
can  become  operative. 

This  minimum  guarantee  insures  to 
the  cooperative  association  sufficient 
business  to  warrant  the  employment 
of  able  men;  sufficient  funds  to  war- 
rant the  payment  of  its  overheads 
without  too  great  a  burden  on  each 
particular  individual;  and,  most  im- 
portant of  all,  a  position  of  impor- 
tance in  the  markets  of  that  commod- 
ity from  the  very  day  that  it  enters 
business.  This  minimum  guarantee 
differs  with  the  commodity;  but  it  is 
always  calculated  as  sufficient  to  en- 
able the  association  to  have  a  voice 
in  the  market;  to  have  a  share  in 
making  the  price  instead  of  merely 
taking  a  price  on  the  current  markets. 

The  contract,  the  long-term,  en- 
forceable contract,  with  a  guaranteed 
minimum,  is  the  basis  of  the  Califor- 
nia business  method. 

Capital  is  needed  only  for  the  erec- 
tion of  physical  facilities,  such  as 
warehouses  or  packing  plants.  This 
should  always  be  done  through  sepa- 
rate subsidiary  corporations.  Coyken- 
dall,  the  brilliant  manager  of  the  Cal- 
ifornia Prune  and  Apricot  Growers' 
Association,  has  worked  out  a  plan 
for  financing  the  erection  of  plants 
through  a  subsidiary  corporation, 
under  which  the  public  puts  up  the 
money  at  the  start,  the  marketing  as- 


sociation'guarantees  the  investment 
with  all  of  the  crops  that  move 
through  it  and  the  growers  amortize 
this  investment  over  a  period  of  from 
five  to  seven  years  out  of  the  pro- 
ceeds of  their  crops,  through  the  Asso- 
ciation, with  very  little  expense  to 
each  individual  grower. 

The  Coykendall  plan  of  finance  has 
been  adopted  and  approved  through- 
out the  United  States  by  associations 
organized  to  handle  cotton,  wheat, 
peanuts  and  many  other  products, 
and  is  considered  one  of  the  great 
contributions  to  the  development  of 
the  cooperative  idea. 

(4)    Cooperative    associations    must 
be  non-profit  and  cooperative  in  char- 
ter.    The  association   must   make   r» 
profit  for  itself.     It  must  simply  de- 
duct the  cost  of  doing  business  and 
normal  commercial  reserves  and  pay 
the  entire  balance  over  to  the  farmers. 
The  heart  of  the  cooperative  idea  in 
California   is   the   internal   pool.     No 
successful    cooperative    association   in 
California    buys    products     from     its 
members  at  a  definite  price.    The  prune 
growers    illustrate   the    best   standard 
method.   About  12,000  growers  deliver 
prunes  to  the  association  at  approxi- 
mately  forty-two   different   points   in 
California.      The    association    accepts 
and   grades   these  prunes   by  variety, 
size,  and  quality,  and  delivers  to  the 
grower  a   grade  receipt  showing  the 
number  of  pounds  of  prunes  he  has 
delivered  to  the  various  pools.     Each 
pool  contains  all  the  prunes  delivered 
to  the  state  association  of  any  partic- 
ular variety,  size  and  quality.     There 
may  be  almost  one  hundred  pools  of 
prunes  in  the  association  in  any  one 
season.      If   a   grower   puts    into   any 
specific  pool  1  per  cent  of  the  prunes 
in  that  pool,  he  gets  1  per  cent  of  the 
net  proceeds.     He  may  have  prunes 
in  forty  or  fifty  pools. 

The  pools  are  sold  from  time  to 
time  in  various  quantities,  in  any  mar- 
ket of  the  world.  As  sales  are  made 
proceeds  are  distributed  back  to  the 
growers,  with  sufficient  retained  to 
equalize  and  average  the  sales 
throughout  the  season.  At  the  end, 
every  grower  receives  the  same  as 
every  other  grower  for  the  same  quan- 
tity, variety,  size  and  quality  of 
prunes. 

One  Standard  Basis. 

Th  California  associations  handle 
nothing  from  non-members.  They  han- 
dle the  products  of  their  members 
only;  and  all  of  those  products  are 
handled  on  the  same  standard  basis 


Every  director  is  a  grower.  His 
products  are  in  the  same  pools  with 
the  other  members.  If  the  director 
wants  a  good  price  for  his  own  prod- 
ucts, he  has  to  help  get  it  for  the 
products  of  every  other  member.  If 
he  wants  to  impose  a  charge  against 
the  other  man's  fruit,  it  likewise  has 
-to  go  on  his  own  products. 

iH^he  California  associations  there 
is  an  absolute  community  of  interests 
between  the  directors  and  the  grow- 
ers. There  is  no  possible  conflict  of 
interest,  and  no  possible  method  in 
which  the  power  of  the  association 
or  its  merchandising  ability  or  the  ef- 
ficiency of  its  managers  can  be  used 
against  the  interest  of  any  one  person 
and  for  the  interest  of  any  other 
person. 

Without  this  internal  pool  and  the 
resulting  community  of  interest,  it  is 
a  sacrilege  to  call  an  association  a  co- 
operative marketing  enterprise.  The 
elevators  throughout  the  Middle 
West  represent  local  mass  action; 
they  do  not  represent  cooperative 
marketing.  They  buy  at  fixed  prices., 
and  never  with  the  intention  of  losing 
money  on  the  transaction.  They  use 
the  common  knowledge  and  supposed 
efficiency  of  central  management 
against  the  individual  grower  and  not 
for  the  grower.  They  buy  from  one 
grower  at  one  price  and  from  another 
grower  at  another  price.  If  they  make 
profits  at  the  end,  they  may  declare 
patronage  dividends  to  their  mem- 
bers, or  otherwise.  But  the  patron- 
age dividend  may  give  some  of  the 
returns  to  the  growers  at  the  bottom; 
it  does  not  equalize  the  season's  oper- 
ations. 

The   Rochdale   Plan 

The  local  elevators  of  the  Middle 
West,  operated  on  the  Rochdale  plan, 
lack  two  great  fundamentals  of  co- 
operative marketing.  They  do  not 
possess  the  primary  aim  of  coopera- 
tive marketing,  namely,  the  merchan- 
dising of  farm  products.  They  do  not 
embody  the  primary  result  of  cooper- 
ative marketing,  namely,  the  distribu- 
tion of  proceeds  so  that  every  person 
receives  exactly  the  same  as  every 
other  person  for  the  same  quantity, 
quality,  variety  and  grade  of  product 
_  (5)  Cooperative  marketing  associa- 
tions do  not  speculate.  They  must 
buy  nothing  from  outsiders  or  from 
members  at  a  fixed  price.  The  pur- 
chase of  products  from  outsiders 
taints  the  legal  standing  of  the  associ- 
ation and  is  an  economic  blunder. 
The  purchase  of  products  from  vari- 
ous   members   at   different  prices    de- 


stroys any  idea  of  cooperation  as 
such,  and  simply  provides  mass  action 
instead  of  cooperative  marketing. 

(6)  Even  if  a  cooperative  associa- 
tion has  the  right  aim  and  the  proper 
method,  it  will  never  be  successful 
unless  it  operates  through  experts  and 
is  conducted  on  the  best  established 
commercial  principles. 

There  is  no  place  in  a  cooperative 
association  for  an  amateur.  The  in- 
dividual farmer  is  essentially  a  pro- 
ducer; he  is  not  an  expert  marketer. 
In  California  the  farmers,  who  are  un- 
questionably as  able  and  independent 
and  intelligent  as  any  other  group  of 
farmers  in  the  United  States,  recog- 
nize that  marketing  farm  products  is 
an  expert  specialty  which  demands 
talents  and  experience  different  from 
that  of  the  ordinarj'  farmer.  There- 
fore, they  pool  their  products,  elect 
directors  who  have  an  absolute  com- 
munity of  interest  with  them,  and 
then  leave  the  sale  of  the  products 
completely  to  those  directors.  The 
directors  then  hire  experts — experts 
for  marketing,  warehousing,  process- 
ing, storing,  financing.  They  pay  ad- 
equate salaries.  The  California  farm- 
er does  not  ask  for  a  fair  price  for 
prunes  and  deny  a  fair  price  for 
brains. 

The  California  associations  do  not 
commit  the  blunder  of  engaging  a 
man  who  is  expert  at  organizing  non- 
commercial farmers'  organizations  to 
administer  the  marketing  activities  of 
their  selling  associations.  The  Califor- 
nia groups  search  throughout  the 
United  States  for  the  ablest  men. 
They  never  say,  "How  chean":  thev 
simply  say,  "How  expert."  The  grow- 
ers recognize  that  agriculture  is  the 
most  important  business  in  California. 
They  have  organized  agriculture  as  a 
business,  and  they  employ  the  ablest 
experts  they  can  find  to  conduct  that 
business.  The  California  farmer 
throws  out  his  chest  and  boasts  that 
he  has  a  $12,000  or  a  $20,000  a  year 
man  working  for  him,  selling  his 
products  on  an  intelligent,  orderly 
basis. 

Without  experts,  cooperative  mar- 
keting associations  are  a  failure. 

(7)  These  associations  when  organ- 
ized must  work  parallel  with  all  com- 
mercial elements.  They  must  be  com- 
munity builders. 

The  association  merchandises  the 
crop  through  its  experts.  It  uses  the 
existing  warehouses,  packers  and 
others  necessary  in  the  process, 
wherever  they  will  work  with  the  as- 
sociation. 


It  is  essential  to  provide  adequate 
financing,  so  as  to  make  advance  pay- 
ments to  the  growers  on  the  delivery 
of  their  crops.  The  bankers  in  Cali- 
fornia have  worked  out  several 
methods  to  enable  the  associations  to 
"make  these  advance  payments  on  a 
large  scale.  In  every  instance  the 
financing  is  done  through  local  bank- 
ers or  through  the  corresjiondents 
whom  the  local  bankers  invite  into 
the  problem. 

The  Pacific  Coast  bankers  have 
provided  funds  at  wonderfully  cheap 
rates,  through  bankers'  acceptances, 
serial  promissory  notes,  ordinary 
promissory  notes,  or  drafts  drawn  by 
growers  and  accepted  by  the  associa- 
tions against  non-perishable  products 
stored  in  public  warehouses.  They 
have  developed  a  technique  of  financ- 
ing under  which  the  bankers  have  been 
enabled  to  tap  the  resources  of  the  : 
Federal  Reserve  Bank  for  the  grow- 
ers and  the  associations. 

The  bankers  have  helped  the  co- 
operative associations  to  work  out 
methods  under  which  the  associations 
secure  funds  for  their  members  in 
liberal  quantities  and  at  amazingly 
low  interest  rates,  without  upsetting 
or  changing  a  single  banking  method 
or  creating  a  single  new  financial 
channel. 

The  California  experience  has 
proved  conclusively  that  if  the  grow- 
ers will  organize  their  own  business 
intelligently,  the  mercantile  and  bank- 
ing elements  of  the  community  will 
be  absolutely  parallel  and  coordinated 
to  their  needs. 

The  California  experience  has  dem- 
onstrated that  it  is  absolutely  wrongi 
as  well  as  unnecessary,  for  the  farm- 
ers to  attempt  to  set  up  their  own 
financial  machinery.  The  existing 
banks  and  the  existing  methods  have 
proved  amply  sufficient.  The  farmer 
in  the  Middle  West  has  not^yet  suc- 
ceeded in  managing  his  own  business; 
and  he  should  go  slow  before  he  tries 
to  set  up  a  new  financial  system  and 
manage  a  business  utterly  foreign  to 
him. 

Cooperative  marketing  associations 
have  been  built  up  in  California  as 
community  enterprises.  The  bankers 
and  merchants  and  editors  and  public 
thinkers  have  all  helped  the  growers 
not  merely  to  form  the  associations 
but  to  keep  them  successful.  The  re- 
sult -is  that  industries  which  were 
practically  dead  have  become  live  and 
prosperous.  The  raisin  industry  which 
left  deposits  in  the  Fresno  district  in 
1910-1912  of  approximately  $1,000,000 


a  year,  in  1918  brought  deposits  iato 
the  same  district  in  excess  of  $24,000.- 
000.  This  was  done  without  the  aid 
of  the  Prohibition  Amendment. 

In  other  rural  districts  where  co- 
operative marketing  associations  cen- 
ter, the  increase  in  bank  deposits  and 
in  the  value  of  the  land  has  been  al- 
most 300  per  cent  greater  than  the 
normal  increase  in  bank  deposits  and 
in  land  values  in  unorganized  sections 
and  unorganized  commodities  of  Cal- 
ifornia. ' 
The  cooperative  associations  of  Cal- 
ifornia have  unified  communities. 
They  have  brought  all  classes  to- 
gether. They  have  shown  how  the 
growers  can  help  and  serve  each 
other;  how  the  growers  can  con- 
tribute to  the  prosperity  of  the  mer- 
chants and  the  merchants  to  the  well- 
being  of  the  growers.  They  have 
shown  how  the  banking  system,  as  it 
now  exists,  can  help  the  growers 
merchandise  their  crops  and  insure 
regular  and  permanent  prosperity  to 
the  great  agricultural  districts. 

The  cooperative  associations  of 
California  have  standardized  products 
both  as  to  quality  and  value.  The 
associations  have  created  demands  for 
products  which  were  constantly  in 
fear  of  over-production.  They  have 
searched  the  globe  for  markets;  they 
have  found  new  uses  for  the  commod- 
ities; they  have  compelled  the  world 
to  absorb  huge  crops  year  after  year 
and  still  come  back  for  more. 

They  have  learned  how  to  handle 
supply;  how  to  store  and  carry  over 
non-perishable  products;  how  to  feed 
their  commodities  into  the  markets 
in  a  sane  and  orderly  fashion  so  that 
the  public,  the  grower,  the  merchant 
-and  the  banker  get  the  benefit  of  sta- 
bilized distribution  instead  of  specu- 
lative and  unintelligent  dumping. 

Above  all  things,  the  California  as- 
sociations have  created  a  new  stand- 
ard of  rural  living  for  the  farmers, 
with  resulting  prosperity  to  the  rural 
towns. 

Last  year,  over  four  out  of  five  of 
the  farmers  in  California  cooperative 
associations  made  profits  on  their 
crops.  At  the  same  time,  over  four 
out  of  five  of  the  growers  of  the 
United  States,  with  superior  crops 
and  more  universal  commodities,  lost 
money  on  their  production. 

The  crop  mortgage  problem  is  al- 
most disappearing  in  California.  The 
erowers  are  primarily  depositors. 
They  use  the  banks  just  as  the  small 
merchants  do.  There  is  a  new  spirit 
in   the  agriculture  of  California,  and_ 


that  spirit  has  fused  together  all  ele- 
ments of  the  community  into  one 
great  prosperous  whole. 

Cooperative  marketing  is  not  a 
whim  or  a  fancy.  It  is  no  particular 
formula;  it  is  the  application  of  a 
group  of  proved  principles  to  any  par- 
ticular  farm  commodity.  Its  results 
are  obvious  and  its  methods  are 
simple. 

The  farmers,  however,  can  neve* 
adopt  cooperative  marketing  except 
through  the  guidance  of  leaders.  The 
bankers  are  the  primary  guides  and 
leaders  of  the  farmers  of  this  country. 
It  is  their  responsibility  as  well  as 
their  privilege  to  show  the  American 
farmer  what  to  avoid  and  what  to 
adopt.  The  bankers  must  show  the 
farmer  how  to  avoid  the  systems  that 
breed  class  antagonism;  that  make 
the  farmer  distrust  all  other  elements 
of  commercial  life;  that  induce  the 
farmer  to  set  up  big  banking  and 
financial  corporations  and  to  try  to 
play  the  other  man's  game  before  he 
has  mastered  his  own. 

The  bankers  must  set  themselves 
openly  against  false  farm  leaders  and 


against  false  farm  systems.     ^ 

As    the    responsible    guides    of    the 
commercial  life  of  America,  the  bank- 
ers should  study  critically  the  cooper- 
ative    movement     in     America,     and 
adapt   the    proved    principles   of   suc- 
cessful  cooperation   to   the   commod- 
ities which  they  finance.    If  the  bank- 
ers want  to  keep  the  farmer  produc- 
ing; and  to  enable  him  to  adopt  a  de- 
cent standard  of  living  and  to  avoid 
tenancy,    there    is    only    one    proved 
means   to   accomplish   this   end.     Co- 
operative  marketing   associations   for 
long   periods    of   years   have    demon- 
strated   that    they    can    merchandise 
farm    crops;    and    by    merchandising  ^ 
farm  crops  they  can  make  enough  for 
the    farmer    'without    increasing    the  j 
cost   to    the   consumer,   to   encourage  j 
the  farmer  to  continue  production;  to ; 
adopt  the   most  reasonable  and  pro-^ 
gressive  forms  of  living  and  standards , 
of  comfort  and  culture;  and  to  grad-: 
ually  work  into  commercial  independ-; 
ence    and   breed   the   type   of   farmer; 
that  is  good  for  American  citizenship.^ 
and  American  ideals.  < 


tX    ,*..,.      - "^ 

:x<i^.  K.ilJ:' liKiiiN CE   ROOJVl 

Your 

American 

Farmer 

Organizes 

for 
Business 

//oze'  He  Is  Changing  Himself  from 

the  Hapless  Victim  of  Markets 

Into  the  Master 

Merchant 

By  Aarox  Sapiro 


Issued  by  The  Department  of  Information 

American  Cotton  Gro^irers 
Exchange 

Dallas,  Texas 


A M E RicAN    Cotton    Growers   Exchan'ge 3 

I 
The  Kind  of  Movement    This  Is 

YOUR  American  farmer  is  organizing  for  busi- 
ness, and  the  accent  is  on  the  "business."  I 
am  using  the  word  in  its  literal  sense,  mean- 
ing trade,  commerce.  The  more  popular  inference 
that  he  is  organizing  "to  get  things  done"  also  ap- 
plies, but  it  applies  without  any  intimation  of  threat, 
menace,  or  radical  measures  of   any  sort. 

For  your  American  farmer  is  organizing  for 
business  because  he  has  found  out  that  his  methods 
of  doing  business,  as  they  have  been  conducted 
heretofore,  are  the  real  cause  of  his  troubles  today, 
far  beyond  any  political  discrimination  that  he  may- 
think  has  existed  against  him. 

The  co-operative  marketing  movement  among 
American  farmers  today  is  purely  economic,  with- 
out any  political  aspects  whatsoever,  and  therein  lies 
a  distinction  which  the  general  public  in  consider- 
ing this  movement  should  bear  in  mind. 

To  say  that  co-operative  marketing  leaders  do 
not  sympathize  with  the  sounder  political  aspirations 
of  the  farmers,  that  they  do  not  feel  gratified  by 
every  new  strength  which  he  acquires  in  the  govern- 
ment of  this  country,  and  that  they  do  not  look 
with  a  certain  friendly  favor  upon  the  general  type 
of  farm  organizations  which  is  quasi-political,  as 
well  as  educational,  in  its  activities,  would  be  folly. 
Co-operative  marketing  associations  owe  much  to 
the  help  of  such  organizations  as  the  Farm  Bureau, 
the  Farmers  Union,  and  others  in  the  education  of 
farmers  to  the  need  for  co-operative  marketing. 

Further,  they  have  found,  as  an  indispensable 
factor  in  their  present  success,  the  education  of  the 
banking  interests  of  this  country  by  the  War  Fi- 
nance Corporation,  a  credit  agency  of  the  United 
States  Government,  to  the  fact  that  the  co-operative 
marketing  associations  are  safe  and  sound  from  a 
financial  standpoint  and  are  fully  entitled  to  the 
vast  credits  which  they  require  in  their  operations. 

But  the  point  is  that  Government  aid  and  the 
support  of  other  farm  organizations  have  no  part 


4  American    Cotton    Growers   Exchange 

in  the  permanent  aims  and  operations  of  the  co- 
operatives, once  they  are  set  up.  They  are  designed 
to  function  completely  within  our  social  structure 
as  it  exists  today,  and  without  requiring  any  radical 
change  except  in  the  present  speculative  system  of 
distributing  farm  products. 

The  whole  idea  of  modern  co-operative  market- 
ing is  to  stop  the  "dumping"  and  substitute  therefor 
the  "merchandising"  of  farm  products. 

Of  what  we  mean  by  merchandising  I  shall  try 
to  give  some  idea  in  a  later  article.  Meanwhile,  if 
we  are  to  understand  the  co-operative  movement  at 
all,  it  is  necessary  to  realize  at  the  outset  what  we 
mean  by  dumping,  and  to  show  that  this  evil  of 
dumping  is  at  the  root  of  the  farmer's  ills  today. 

Every  man  knows,  or  should  know,  that  the 
farmer  receives,  on  the  average,  a  smaller  percent- 
age of  the  consumer's  dollar  than  the  producer  in 
any  other  line  of  American  industry.  He  works 
harder  and  longer  hours  than  anybody  else,  and 
yet  his  standard  of  living  today,  except  in  certain 
marked  communities  where  co-operative  marketing 
has  for  some  time  been  successfully  applied,  is  a 
generation  behind  that  of  his  city  brethern. 

Everybody  also  knows  that  when  the  great  crash 
in  values  began  in  the  fall  of  1919,  whereas  other 
commodities  as  a  rule  declined  more  or  less  gradu- 
ally, and  other  businesses  were  able  to  adjust  them- 
selves to  a  process  of  deflation  covering  many 
months,  the  prices  on  farm  products  crashed  far 
below  the  levels  indicated  by  the  law  of  supply  and 
demand  almost  immediately,  and  the  average  Ameri- 
can farmer  found  himself  practically  ruined  over 
night. 

All  this  is  due  to  one  fundamental  difference 
between  the  farmer  and  other  producers.  Other 
industries  are  organized,  through  the  factory  sys- 
tem, for  group  production,  and  even  more  highly 
organized,  by  the  combination  of  many  factories, 
in  many  instances,  into  great  mergers  of  one  sort 
or  another,  for  group  selling. 

The  farmer  has  never  been,  and,  because  of  the 
inherent   nature  of   his  calling,  which   scatters  him 


American    Cotton    Growers   Exchange 5 

in  millions  of  complete  production  units  all  over 
the  face  of  the  land,  never  will  be,  organized  for 
group  production.  And,  until  the  coming  of  co- 
operative marketing,  which  is  the  only  thing  that 
makes  possible  organization  for  group  selling  witlv 
out  organization  for  group  production,  he  has  never 
been  organized  for  group  sellng. 

The  result  of  the  situation  has  been  as  follows: 
that,  whereas  other  industries,  through  a  few  gigan- 
tic selling  organizations,  deliver  their  product  gradu- 
ally, throughout  the  year,  under  expert  merchand- 
ising and  financing  guidance,  to  the  markets  of  the 
world  as  those  markets  will  absorb  them,  the  farmer, 
producing  throughout  the  year,  has  heretofore  sold 
the  entire  fruits  of  his  year's  labor  within  seventy 
days,  on  the  average,  after  harvest,  each  of  the  in- 
dividual millions  of  farmers,  knowing  nothing  about 
market  conditions,  knowing  nothing  about  sales- 
manship, dumping  his  product  in  competition  with 
each  one  of  his  fellow  farmers  in  that  one  brief  time 
without  regard  to  the  absorption  powers  of  the 
markets  of  the  world. 

Speculative  interests  acquire  this  farm  produce 
for  what  they  choose  to  give  for  it  and  then  deliver 
it  to  the  consumers  of  the  world  more  or  less  gradu- 
ally after  deducting  as  many  profits  in  innumerable 
turnovers  as  can  be  made. 

That  is  what  is  the  matter  with  the  economic 
condition  of  the  American  farmer  today,  and  that — 
this  dumping  process — is  what  co-operative  market- 
ing is  designed  to  stop. 


American    Cotton    Growers   Exchange 


II 

A  Little  History  and  Evolution 

A  MODERN  co-operative  marketing  organiza- 
-^*-  tion  is  a  highly  technical  form  of  business 
institution.  It  is  devised  for  the  most  successful 
marketing  of  farm  products  in  the  interest  of  its 
member  farmers,  and  for  nothing  else.  It  bears 
slight  resemblance  to  any  other  form  of  American 
business  organization,  and  has  nothing  to  do  with 
"consumer  co-operation,"  or  co-operative  buying, 
which  is  a  cat  of  an  entirely  different  color. 

In  the  next  article  I  propose  to  give  a  brief  out- 
line of  the  fundamental  principles  of  such  an  organi- 
zation. Meantime  let  us  have  a  look  at  the  pro- 
cess of  their  evolution. 

No  more  ridiculous  idea  can  be  conceived  than 
that  the  highest  type  of  co-operative  marketing 
organization,  as  it  exists  today,  has  sprung  full- 
fledged,  within  the  past  two  or  three  Aears,  from 
the  brain  of  any  one  man  or  group  of  men.  It  is 
the  fruit  of  a  long  and  infinitely  varied  experience 
and  the  evolution  of  a  successful  form  has  been 
gradual. 

Co-operation,  very  close  to  our  newest  type,  while 
practiced  on  a  lesser  scale,  has  been  practiced  in  vari- 
ous countries  in  Europe  for  the  past  half  century. 
Co-operation  of  a  less  efficient  character  has  been 
gradually  growing  among  American  farmers  for 
fully  that  period  of  time. 

For  centuries,  the  farmers  of  the  world  have  been 
organizing,  in  one  way  or  another,  with  the  end  in 
view  of  acquiring  for  themselves  "middlemen's 
profits."  This  is  only  a  part  aim  of  modern  co- 
operative marketing,  whose  fundamental  purpose  of 
eliminating  the  dumping  process  has  only  been  under- 
stood and  evolved  within  the  past  few  years.  Fur- 
thermore, we  now  recognize  the  usefulness  of  the 
distributive,  as  distinguished  from  the  speculative, 
middleman.  Therefore  past  efforts  have  been 
mostly  inefficient,  but  they  have  tended  in  the  right 
direction. 

The  dairy  farmers  of  Switzerland  have  been  co- 
operating for  the  past  three  hundred  years.  All  over 
Europe,  during  the  first  half  of  the  last  century, 
there  sprurig  up  among  farmers  various  forms  of 
co-operative  banks  and  co-operative  stores.  The 
success  of  the  famous  co-operative  store  of  the  forty 
weavers  of  Rochedale,  in  England,  which  was  in- 


American:    Cottox    Growers    Exchan'ge 7 

stituted  about  1840,  rapidly  spread  its  story  all 
over  the  world  and  resulted  in  innumerable  efforts 
at  co-operative  selling  upon  the  Rochedale  plan, 
which,  being  a  plan  of  consumer  co-operation  and 
not  a  plan  of  producer  co-operation,  has  produced 
as  many  failures  as  successes. 

The  older  farm  organizations  in  this  country 
began,  shortly  after  the  Civil  War,  to  set  up  local 
co-operative  wheat  elevators  and  co-operative  cream- 
eries based  upon  the  Rochedale  plan  which  now 
dot  the  middle  west  of  the  United  States  by  the 
thousands. 

Sometimes  they  have  been  successful  and  more 
frequently  they  have  been  complete  failures.  In 
the  majority  of  cases  they  have  been  neither  suc- 
cesses nor  failures.  That  is  to  say,  they  have  man- 
aged to  operate  without  either  marked  profit  or 
loss  to  their  member  farmers.  In  all  cases  they  have 
had  no  effect  whatsoever  upon  general  market  con- 
ditions, for  these  little  isolated  locals,  acting  inde- 
pendently, have  no  way  of  making  any  impression 
whatsoever  against  the  dumping  process  referred 
to  in  my  last  article.     In  fact  they  take  part  in  it. 

IMeantime,  an  event  of  world  importance,  then 
unrecognized,  was  taking  place  in  the  little  Euro- 
pean country  of  Denmark.  When,  about  1866, 
Prussia  took  Schleswig-Holstein  from  Denmark,  she 
deprived  that  little  country  of  the  wheat  fields  that 
had  been  the  main  source  of  income  from  export 
for  her  people.  The  Danes  were  thrown  back  for 
support  almost  solely  upon  their  dairy  products — ■ 
products  which  were  also  raised  in  practically  every 
country  in  Europe.  It  was  up  to  the  Danish  farmer, 
then,  to  devise  a  means  of  marketing  his  dairy  pro- 
ducts so  that  they  could  compete  with  foreign  dairy 
products  in  foreign  lands.  He  did  it  by  compact, 
large  scale  co-operative  marketing  organization,  with 
merchandising  as  its  aim.  And  the  Danish  farmer 
receives,  today,  a  larger  percentage  of  the  con- 
sumer's dollar  than  any  other  farmer  in  Europe. 

He  had  evolved  the  plan  of  co-operative  market- 
ing, the  essentials  of  which,  I  will  present  later. 
Through  it,  he  has  made  Denmark  the  land  with 
the  smallest  percentage  of  tenantry  and  the  most 
prosperous  agriculturial  country  on  the  face  of  the 
earth. 

Meantime,  his  experiment  was  not  known  to 
American  farmers  until  very  recently  and  the 
American  farmer  has  worked  out  his  problem  inde- 
pendently, within  the  past  twenty  years,  in  the  great 


8 American    Cotton    Growers   Exchange 

laboratory  of  California.  During  that  time,  two 
or  three  notable  co-operative  successes  were  worked 
out  in  fruit  and  dairy  products  elsewhere  in  the 
United  States  but  they  were  few  and  far  between. 

The  California  farmer,  twenty  or  more  years 
ago,  w^as  as  badly  off,  if  not  worse  off,  than  the 
average  American  farmer  today.  He  had,  for  the 
most  part,  perishable  specialty  crops  to  sell  to 
markets  two  or  three  thousand  miles  away.  He 
had  a  freight  rate  that  broke  his  back.  He  had  a 
group  of  speculators  on  his  neck  that  came  very 
near  to  putting  him  out  of  business. 

During  the  past  twenty  years,  having  learned  the 
fundamental  principles  from  the  Danes  only  since 
1913,  these  California  farmers  organized,  through 
failure  after  failure,  for  co-operative  marketing, 
until  they  had,  in  the  crash  year  of  1919,  giant  co- 
operative marketing  units  selling  twenty-eight  dif- 
ferent types  of  farm  produce,  from  oranges  or 
prunes  to  eggs  or  alfalfa,  to  the  tune  of  $250,000,- 
000  of  business  a  year. 

When  the  crash  came,  it  turned  out  that,  while 
the  average  American  farmer  was  ruined,  over  eighty 
per  cent  of  the  farmers  of  California  made  some 
profit  in  1919-1920.  With  that  astounding  fact 
to  attract  their  attention,  the  farmers  of  the  whole 
country,  including  those  producing  the  great  staples 
of  the  land,  began  to  take  their  leaves  out  of  the 
book  of  Denmark  and  California,  and  on  the  very 
first  page  of  their  new  volume  is  written  the  organi- 
zation history  of  the  giant  tobacco,  cotton,  wheat, 
dairy  product  and  innumerable  specialty  crop  co- 
operatives that  have  sprung  into  being  since. 


I 


American    Cotton    Growers   Exchange  9 

III 

A   Unique  Form  of  Business  Organization 

T  has  been  said  that  the  form  of  organization  for 
a  modern  farmers  co-operative  marketing  assoc- 
iation is  a  very  technical  matter.  Furthermore,  the 
technique  has  to  be  varied  slightly  for  each  different 
commodity  or  type  of  commodity  to  which  the 
organization  plan  is  applied. 

For  instance,  you  can't  have  exactly  the  same 
type  of  contract  for  a  strict  perishable  like  oranges, 
in  which  the  chief  problem  is  one  of  rapid  and  effi- 
cient routing;  as  you  have  for  a  semi-perishable  like 
eggs,  where  the  principal  problem  is  one  of  proper 
processing  storage,  or  packing;  or  a  strict  non- 
perishable  like  cotton,  in  which  none  of  the  afore- 
mentioned problems  are  of  very  great  importance 
and  the  chief  problem  is  one  of  financing  over  long 
periods  of  gradual  sale. 

In  the  organization  of  all  types  of  commodities, 
however,  certain  fundamental  principles  hold  good, 
and  it  is  a  rapid  fire  outline  of  these  which  I  pro- 
pose to  give  in  this  article. 

Of  late,  co-operatives  being  newly  set  up  in  this 
country  usually  meet  all  requirements  of  this  plan 
at  the  outset.  There  are  many  strong  co-operatives, 
however,  which  have  gradually  transformed  their 
form  of  organization  over  long  years  of  experience 
until  it  now  meets  these  requirements,  even  though, 
for  some  of  them,  there  are  apparent  differences 
which  do  not  really  exist.  Whether,  through  gradu- 
al evolution  from  a  bad  start,  or  by  recognition  of 
these  principles  at  the  outset,  all  except  one  or  tw^o 
of  the  larger  co-operative  marketing  associations  of 
the  country  fit  the  five  fingers  of  ■  the  following 
glove : 

1.  Organization  upon  a  commodity  basis. 

2.  Organization   under  long  term   binding  con- 
tracts with  member  growers. 

3.  Purely   co-operative   control    and    pooling   of 
all  produce  of  -x  like  grade  and  variety. 

4.  Organization  upon  a  large  scale. 

5.  Employment  of  experts. 


10 American    Cottom    Growers    Exchange 

Your  modern  co-operative  is  organized  upon  what 
is  now  commonl}'  called  the  "commodity  plan"  of 
organization  because  of  its  primary  principle  that  it 
is  organized  about  one  commodity,  or  closely  re- 
lated group  of  commodities,  only,  without  greater 
regard  than  is  absolutely  necessary  to  locality.  We 
do  not  organize  sections,  we  do  not  organize  farms, 
we  do  not  organize  farmers.  We  organize  com- 
modities, and  that  is  all. 

These  organizations  may  or  may  not  have  capi- 
tal stock.  The  newest  and  biggest  are  organized 
today  without  it.  Where  they  have  to  buy  ware- 
housing or  processing  plants,  they  organize  subsi- 
diary corporations,  controlled  by  their  member 
farmers,  to  purchase  or  build  such  property.  In- 
stead of  capital  stock  these  organizations  possess  the 
greatest  credit  backbone  in  the  world — a  guaranteed 
volume  of  business.  They  are  organized  under  long 
term,  binding  contracts,  covering  a  stated  period 
of  years,  during  which  the  member  farmer  agrees 
to  deliver  outright  to  his  association  every  bit  of 
the  commodity  that  he  raises. 

That  means  that  his  association  can  conduct 
financial  operations  with  these  groups  of  the  com- 
modity as  collateral,  far  beyond  the  reach  of  the 
individual  farmer.  It  means  that  they  can  be  relied 
on  to  fill  orders  for  good  customers  over  a  period 
of  years.  It  means  that  the  next  year's  crop  further 
guarantees  the  perfect  security  of  any  credit  ad- 
vanced upon  the  commodity.  And  it  means  that 
speculative  interests  undertaking  to  lose  money  to 
see  that  farmers  outside  the  organization  receive 
more  than  those  on  the  inside,  with  the  idea  of  thus 
destroying  the  unit,  have  a  long  and  practically  im- 
possible job  ahead  of  them.  Whether  they  have 
capital  stock  or  not,  all  commodity  organizations 
have  these  binding  marketing  contracts. 

The  organizations  are  purely  co-operative.  In 
the  conduct  of  their  aflfairs,  every  member  has  one 
vote,  and  only  one.  By  districts,  the  members  elect 
a  board  of  directors  from  their  own  number,  one 
director  from  each  district,  and  each  one  of  whom 
is  a  grower,  since  no  one  except  growers  can  be- 


American'    Cottom    Growers   Exchan'ce 11 

come  members.  This  board  runs  the  association. 
The  association  makes  no  profit  as  such  but  returns 
to  the  members  all  receipts  from  sales  after  the 
actual  selling  cost  has  been  deducted. 

The  products  of  the  members  are  graded,  and 
pooled  by  grade,  each  member's  commodity  of  the 
same  grade  and  variety  going  into  the  same  pool. 
The  individual  member  no  longer  owns  the  partic- 
ular bales,  or  bushels,  or  tons,  of  the  stuff  that  he 
delivered.  He  owns  an  interest  proportionate  to  the 
amount  which  he  delivered  in  the  pool  covering  that 
grade,  and  every  time  a  sale  is  made  from  that 
pool  he  gets  his  share  of  it.  All  members  that  want 
it,  are  paid  an  advance  equal  to  the  loan  value  on 
the  commodity,  at  the  time  of  delivery.  Subse- 
quently, they  receive,  in  gradual  payments  through- 
out the  year,  the  average  price  received  by  all  mem- 
bers of  the  association  for  the  particular  grade  and 
type  of  material  which  thej'  delivered. 

The  next  principle  is  organization  upon  the  largest 
possible  scale.  The  organization  need  not  have  a 
monopoly  of  the  particular  commodity  which  it  is 
handling,  but  it  should  be  the  largest  single  dealer 
in  its  particular  field.  In  other  words,  it  should  be 
big  enough  to  be  watched  by  other  dealers  in  the 
trade  for  fair  prices,  just  as  in  other  industries  the 
eyes  of  the  trade  are  always  turned  toward  certain 
leaders.  Beyond  this,  large-scale  organization  is 
necessary  for  the  greatest  efficiency  at  the  lowest 
cost  per  capita.  It  is  only  with  a  comparatively 
large  scale  of  organization  that  the  organization  is 
able  to  fulfill  the  fifth  and  final  requirement  of 
the  greatest  experts  obtainable  to  conduct  its  tech- 
nical affairs. 

Your  modern  co-operative  is  governed  by  a 
farmers  board  of  directors.  But  its  business  is 
actually  carried  out  by  the  finest  merchandising,  ad- 
vertising, warehousing,  transportation,  financing, 
insurance,  and  other  experts  that  money  can  buy. 


12  American    Cotton    Growers    Exchange 

IV 

What  Merchandising  Means 

"\7'OUR  farmers  producing  a  certain  crop  have 
-■-  set  up  their  organization.  They  are  organized 
upon  a  big  scale,  compact  and  powerful.  Now, 
what  do  they  do  with  that  organization  ?  Set  out 
to  stop  dumping?  Yes.  But  that  is  only  the  nega- 
tive end  of  the  process.  The  positive  end  is  that  they 
set  out  to  merchandise  their  product  after  the  most 
advanced   methods   of   big  American    business. 

The  large  manufacturer,  the  merchandising  ex- 
pert of  magazine  and  newspapers,  the  big  merchant, 
will  know  instantly  what  we  mean  by  merchandis- 
ing. The  average  American  business  man  probably 
has  an  idea  of  the  word  that  nowhere  approaches 
adequacy.  "Oh,  yes,"  he  says,  "they  probably  mean, 
first  you  advertise  like  the  dickens  and  then  you  put 
a  new  line  of  pep  talk  into  your  force  of  salesmen." 

Well,  that  isn't  so  bad  at  that;  though  it  is  a 
first  glimmering  and  nothing  more.  Advertising 
does  play  a  tremendous  part  in  the  game.  Anybody 
who  reads  the  magazines  and  newspap:rs  today  and 
sees  certain  brands  of  California  or  Florida  citrus 
fruits,  raisins,  and  other  food  products  advertised  in 
magnificent  and  costly  displays,  ought  to  know 
without  being  told  that  the  co-operative  marketing 
associations  which  are  handlers  of  the  products  in 
question  are  among  the  foremost  believers  in  adver- 
tising in  this  world.  Three  California  co-operatives 
are  alone  spending  $4,000,000  this  year  for  adver- 
tising. They  swear  by  it.  But  it  is  only  one  part 
of  the  game. 

Merchandising  is  a  bigger  and  deeper  thing  than 
that.  Merchandising  is  everything  that  enters  into 
the  business  of  increasing  permanently  the  demand 
for  your  product.  Merchandising  by  a  certain 
co-operative  marketing  association  has  increased 
b\'  six  times  the  American  consumption  of  one  well- 
known  California  food  crop  within  the  last  ten 
years  alone.  Advertising  did  a  lot  of  it,  but  adver- 
tising did  not  do  it  all. 


American    Cotton    Growers    Exchange  13 

The  first  thing  that  good  merchandising  requires 
is  to  make  the  supply  of  the  product  as  attractive 
as  possible.  You  will  find  the  co-operatives  chang- 
ing completely  the  grading  systems  for  the  goods 
that  they  handle  the  instant  they  enter  the  field. 
You  will  find  them  spending  large  sums  and  tre- 
mendous energies  in  the  education  of  their  growers 
to  the  production  of  better  and  better  quality.  You 
will  find  them  improving  the  packing  and  the  pro- 
cessing of  goods.  You  will  find  them  developing 
new  uses  for  these  goods. 

The  first  year  the  California  Associated  Raisin 
Company,  now  the  Sun-Maid  Raisin  Growers,  in- 
troduced the  use  of  raisins  in  the  baking  of  bread; 
more  raisins,  it  is  said,  were  baked  in  bread  by 
American  bakers  than  had  been  consumed  by  the 
entire  country  before  that  co-operative  organization 
came  into  existence.  Last  year,  almost  as  many 
more  were  sold  in  the  form  of  a  new  five  cent 
package.  ; 

A  certain  California  Poultry  Producers  Associa- 
tion sells  eggs  in  the  markets  in  New  York  City  at  a 
premium  of  3c  a  dozen  over  eggs  raised  right  in 
New  York  State,  because  of  the  use  of  certain 
packing  processes  which  they  have  evolved,  which 
assure  a  better  and  more  reliable  product. 

Merchandising  means  the  improvement  of  distri- 
bution to  existing  markets,  both  as  to  time  and  to 
place.  It  means  the  avoidance  of  glutting  one 
market  while  another  is  starving  for  the  goods.  It 
means  the  development  and  use  of  storage  methods  to 
carry  over  such  portions  of  the  crop  as  cannot  be 
disposed  of  immediately  at  any  given  time. 

It  means  the  constant  creation  of  new  markets, 
new  places  where  the  goods  can  be  sold  as  well  as 
the  development  of  new  uses.  It  means  the  develop- 
ment of  manufacturing  processes  and  uses  for  by- 
products. It  means,  as  I  indicated  at  first,  every- 
thing that  tends  to  increase  the  total  consumption  of 
the  product. 

And  above  all,  merchandising  includes  that  com- 
plete and  skillful  generalship  over  the  distribution 
of  the  product  which  has   for  its  aim   the  gradual 


14  American    Cotton    Growers   Exchange 


feeding  of  the  commodity  to  the  market  onlj'  so 
fast  as  the  market  will  absorb  it  and  in  a  way  that 
will  tend  to  maintain  as  steady  a  price  level  as 
possible. 

This  process,  requiring  the  completest  knowledge 
of  market  conditions  and  the  highest  type  of  skill, 
is  nothing  more  nor  less  than  the  positive  antithesis 
of  the  dumping  evil  which  the  whole  system  is 
designed  to  remedy.  A  wise  control  over  the  flow 
of  the  general  supply  of  a  product  to  the  market 
means  that,  once  it  becomes  general,  the  prices  of 
farm  products  will  be  determined  by  the  balance 
of  supply  and  demand  at  the  point  of  consumption, 
as  is  the  case  with  other  merchandise  today,  and 
not  by  the  balance  of  wildly  flunctuating  demand 
at  point  of  consumption  against  a  known  supply  for 
the  year  at  the  point  of  production.  It  is  this  last 
state  of  affairs  which  gives  us  the  absurd  and  harrow- 
ing fluctuations  from  month  to  month,  from  week  to 
week,  and  even  from  day  to  day  in  such  a  product, 
for  example,  as  cotton,  whose  real  value  cannot 
possibly  change  within  twenty-four  hours  to  the 
extent  that  it  sometimes  appears  to  change  in  our 
market  quotations. 

Your  co-operative  marketing  association  mer- 
chandises, and  merchandises  to  an  extent  unequalled 
by  any  other  form  of  business  organization  in  the 
world.  It  has  got  to.  It  must  make  this  contri- 
bution to  progress  and  civilization  or  defeat  its 
own  ends.     Why,  I  will  show  later. 


American   Cotton    Growers   Exchange  15 


V 

JVhat  It  Does  For    The   Farmer 

HERE,  then,  is  a  process  designed  to  transform 
the  farmer  from  the  slave  and  the  hapless  vic- 
tim to  the  merchandising  master  of  the  markets  of 
the  world.  Furthermore,  it  is  a  process  which  has 
attained  its  ends  wherever  it  has  been  consistently 
applied. 

A  dozen  years  ago,  Fresno,  California,  a  town 
which  one  might  call  the  capital  of  two  of  the 
biggest  co-operative  marketing  associations  in  that 
State,  was  down  and  out.  Traveling  salesmen  had 
quit  "making"  the  place  because  the  credit  of  its 
merchants  was  not  any  good.  The  little  city,  like 
many  moderate-sized  communities,  most  of  which 
don't  realize  it,  was  absolutely  dependent  upon  the 
welfare  of  the  surrounding  agricultural  population, 
and  the  surrounding  agricultural  population  was 
dead  broke. 

Today,  your  last  census  will  tell  you,  Fresno, 
California  is  the  richest  place  for  its  size  of  any 
town  in  the  United  States,  Of  the  fifty  richest 
agricultural  counties  in  America,  ten  are  in  Cali- 
fornia. The  first  two  are  in  California  and  five 
of  the  first  ten  are  in  California — and  California 
is  the  land  of  specialty  crops  between  two  and 
three  thousand  miles  from  its  principal  market, 
with  irrigation  problems,  the  competition  of  Japan- 
ese farm  labor,  and  other  limitations  that  do  not 
apply  to  many  of  the  other  rich  agricultural  sections 
of  the  United  States.  California  stands  first  in 
rural  roads,  first  in  rural  schools,  and  first  in  the 
salaries  paid  to  rural  school  teachers  and  rural 
ministers. 

Co-operative  marketing  did  this — did  it  prac- 
tically all. 

Now  such  a  development  as  this  is  the  fruit  of 
many  ^-ears  of  correct  co-operation,  but  sometimes, 
the  effect  of  proper  co-operative  marketing  is  almost 
instantly  apparent. 

Down  in  the  white  Burley  Tobacco  districts 
of  Kentucky,  Ohio  and  Indiana  where  Judge  Robert 
Bingham,  with  the  help  of  other  far-seeing  leaders. 


16  American    Cotton    Growers    Exchange 

organized  the  tobacco  farmers  almost  overnight  into 
the  Burley  Tobacco  Growers  Association,  which 
sold  about  70%  of  the  entire  Burley  tobacco  crop 
in  the  first  year  of  its  operation,  there  are  families 
of  Kentucky  tobacco  farmers  that  have  bought  shoes 
for  the  feet  of  their  children  this  fall  for  the  first 
time  in  three  years! 

It  does  not  always  work  anything  like  that.  You 
don't  usually  control  a  crop  to  that  extent  in  the 
first  year  of  operation.  You  have  the  mortgage 
difficulty  to  overcome,  vast  numbers  of  more  or 
less  ignorant  farmers  to  educate  to  a  loyal  support  of 
their  organization.  The  American  Cotton  Growers 
Exchange  represents  this  year,  the  second  of  its 
operation,  only  between  one-fourth  and  one-fifth  of 
the  American  cotton  crops  and  it  can't  get  hold 
of  all  of  that  because  so  much  of  it  is  under  mort- 
gage, but  it  is  functioning  efficiently  and  the  cotton 
co-operative  movement  is  running  forward  by  leaps 
and  bounds.  The  new  wheat  movement  is  not  even 
this  far  advanced. 

The  great  majority  of  specialty  crop  organiza- 
tions, in  the  localities  where  they  have  been  set  up, 
are  meeting  with  genuine  success  at  the  outset ;  but 
every  once  in  a  while  there  are  hideous  blunders  of 
a  costly  nature.  I  know  one  specialty  crop  organi- 
zation in  the  East,  properly  organized  and  controll- 
ing nearly  half  of  the  product,  v/hich  almost  came 
a  cropper  in  the  first  year  of  its  organization  through 
trying  to  handle  business  before  it  was  prepared  to, 
then  being  horribly  mishandled  by  a  grossly  incom- 
petent manager,  and,  in  addition,  being  tricked  into 
huge  losses  by  a  speculative  group  which  formerly 
controlled  the  industry.  Fortunately,  however, 
these  tumbles,  very  frequent  in  the  past,  are  rare 
today  and  recovery  is  prompt.  The  organization  in 
question  is  on  its  feet  again  and  doing  business  this 
year.  And  all  over  the  country  new  organizations 
^re  springing  up  almost  every  day. 

They  mean,  as  immediate  results  for  the  farmer, 
tetter  prices,  steadier  prices,  opportunity  for  greater 


American    Cotton    Growers   Exchange 17 

production,  direct  sale  from  producer  to  consumer, 
the  elimination  of  speculative  waste,  and  cheaper 
money. 

All  but  the  last  may  be  called  the  direct  results 
of  proper  merchandising.  The  last  is  the  fruit  of 
these  results  together  with  the  fruit  of  organization 
in  a  form  that  can  approach  sources  of  credit  un- 
available to  the  individual  farmer,  and  approach 
them  with  a  security  for  loans  of  much  higher 
value  than  the  individual  farmer  can  offer.  The 
value  of  the  crop  is  not  greater  than  when  it  is  in 
the  hands  of  the  individual  farmer,  but  that  value 
remains  steadier  and  is  backed  by  the  valuation  of 
succeeding  crops  when  it  is  being  handled  by  co- 
operative organizations.  Some  of  the  co-operatives 
are  today  borrowing  4^2 /C  money  for  their  farmers, 
and  the  same  machinery  which  thus  makes  safer 
distribution  credits  will  eventually  prove  the  means 
of  changing  the  production  credits  systems  of  the 
country  to  meet  the  farmers'  needs  without  strain 
upon  our  banking  interests. 

But,  more,  again,  of  this  in  the  subsequent  articles. 
Here  we  have,  to  summarize,  a  great  boon  for  the 
farmer,  a  solution  of  his  problems.  It  is  a  powerful 
solution,  a  solution  dealing  with  the  distribution 
of  products  that  are  a  life  necessity  to  every  man, 
woman  and  child,  and  therefore,  a  solution  in  which 
the  consumer  is  as  vitally  interested  as  the  producer. 
The  suceeding  articles  of  this  series  will  deal  with 
the  effect  of  this  co-operative  marketing  process 
from  the  non-farmer's  viewpoint. 


18 American-    Cotton-    Growers    Excha nge 

VI 

Jf'hat  It  Can't  Do  to  You 

NOW,  let  us  talk  a  little  about  the  effect  of 
this  business  upon  the  consumer.  Farmers 
and  their  families,  and  the  tiny  rural  communities 
which  are  dependent  almost  entirely  upon  their  sup- 
port, themselves  constitute  nearly  half  of  the  con- 
sumers of  this  country.  Nevertheless,  we  will  bar 
them  from  this  particular  phase  of  the  discussion. 
The  consumers  who  are  to  be  considered  here  are 
the  non-farming  half  of  the  consuming  public. 

Admittedly,  these  new  co-operative  marketing 
associations  are  compact  and  powerful  in  form. 
Nay,  more,  a  few  of  them  control  the  sale  of  more 
than  half  of  the  commodity  in  which  they  are  opera- 
ting, and  all  of  them  are  striving  to  become  as  large 
as  possible  and  obtain  control  of  a  dominant  portion 
of  their  crop.  These  crops  are  necessities  which  you 
and  every  other  man  must  buy  to  eat  and  clothe 
yourself.  Therefore,  it  is  possible  that,  before  you 
understand,  you  view  this  movement  with  alarm 
and  say  to  yourself,  "Good  Heavens!  What  is  this 
— another  group  of  terrible  trusts  which  is  spring- 
ing up  to  turn  Mr.  Common  People  upside  down 
and  shake  the  last  nickel  out  of  his  pocket?" 

Nothing  could  be  further  from  the  actual  truth, 
which  is  that  these  co-operative  associations  have  got 
to  make  themselves  a  positive  benefit  to  you,  the 
consumer,  or  go  out  of  business. 

The  Supreme  Court  of  the  United  States  not  long 
ago  had  before  it  proceedings  to  dissolve  the  United 
States  Steel  Corporation,  which  sells  something  like 
fifty  per  cent  of  the  steel  produced  in  the  United 
States.  In  spite  of  our  anti-trust  laws,  the  Supreme 
Court  refused  to  do  this,  holding  that  the  United 
States  Steel  Corporation  might  be  a  practical  monop- 
oly, but  that  it  was  a  beneficial  monopoly  and  not  a 
trust  in  the  offensive  sense.  It  did  not,  found  the 
Court,  indulge  in  pernicious  practices  to  raise  prices, 
it  did  not  put  competitors  out  of  business,  and,  in 
general,  it  tended  to  do  good  to  the  general  public 
by  its  stabilizing  influence  in  the  steel  market,  and 
not  to  do  harm. 


American    Cotton    Growers   Exchange 19 

That  decision  was  based  upon  the  way  in  which 
the  United  States  Steel  Corporation  was  being 
managed.  At  any  time,  it  might  conduct  itself 
differently  and  come  under  the  provisions  of  the  anti- 
trust laws.  The  case  with  your  co-operative  market- 
ing association  is  very  different  to  that.  The  co- 
operative marketing  association  has  not  the  power 
to  become  an  offensive  trust,  even  if  it  wanted  to, 
and  here  is  the  reason  in  a  nutshell: 

A  co-operative  marketing  association,  no  matter 
whether  it  controls  10%  of  the  crop  or  95%  of  the 
crop,  cannot  control  production. 

This  is  not  the  case  with  your  industrial  trust 
or  even  with  a  perfectly  organized  labor  organiza- 
tion. Your  trust  can  shut  down  its  factories.  Your 
labor  union  can  call  its  workers  out  on  strike.  But 
no  co-operative  marketing  association  can  make  the 
American  farmer  strike,  or  shut  down  the  American 
farm. 

Please  note  that  I  am  not  saying  that  the  co- 
operative associations  do  not  do  this,  I  am  saying 
that  they  cannot  do  it.     It  is  beyond  their  power. 

One  reason  is  that  they  are  specifically  given  no 
such  power  in  their  contracts  with  their  member 
farmers.  If  they  were,  they  would  become  illegal 
as  being  in  restraint  of  trade,  just  as  any  other 
monopoly  of  similiar  size  would  come  under  the  com- 
mon law  governing  restraint  of  trade.  They  have  to 
take  in  any  farmer  who  wants  to  join  on  the  same 
basis  as  every  other  farmer,  and  they  have  to  handle 
every  bit  of  the  product  which  he  produces. 

Another  reason  is  that  even  if  they  were  given 
the  nominal  power  to  control  production  they  could 
not  exercise  it.  Attempts  to  make  the  farmer  cut 
down  acreage  or  otherwise  curtail  production  in 
the  face  of  higher  prices  have  been  made  again  and 
again  by  farmers'  movements  of  a  different  type. 
They  have  always  failed.  The  only  production 
reducer  on  the  American  farm  is  production  at  a 
loss;  and  then  the  farmer,  hoping  always  to  win 
"next  year"  in  the  \vild  gamble  that  now  character- 
izes his  business,  produces  in  the  face  of  loss  to  a 
greater  extent  than  any  other  t3pe  of  producer. 


20 American    Cotton    Growers   Exchange 

Therefore,  it  follows  as  a  matter  of  economic 
law,  that  the  instant  the  co-operative  associations 
secure  better  prices  for  their  farmers,  barring  the 
vicissitudes  of  nature,  you  are  going  to  have  a 
greater  production  the  following  year.  The  funda- 
mental law  of  supply  and  demand  always  holds  in 
the  long  run  as  the  iron  law  of  prices,  and  that  means 
that  unless  consumption  of  the  product  has  been  in- 
creased, lower  prices  must  follow  increased  pro- 
duction. 

So  you  can  see  that  it  is  absolutely  necessary  for 
the  co-operatives  to  increase  consumption  so  that 
the  increased  consumption  will  absorb  the  greater 
supply  of  the  product  which  the  benefits  they 
confer  upon  their  farmers  bring  into  being.  You 
cannot  make  the  consumer  buy  things  in  greater 
quantity  than  he  bought  them  before.  You  can  only 
induce  him  to  increase  his  purchases.  And  the  only 
method  of  inducing  him  is  to  give  him  greater  value 
for  the  money  that  he  spends.  Thus  j^our  co-opera- 
tive association  cannot  hold  up  the  consumer,  but 
must  actually  benefit  him,  or  defeat  its  own  ends. 
How  it  benefits  him  will  be  the  subject  of  the  next 
article. 


American    Cotton    Growers   Exchange 21 

VII 
What  It  Does  Do   For   You 

THE  co-operative  association,  then,  has  got  to  con- 
fer a  benefit  upon  the  consumer,  to  take  care  of 
the  increased  production  following  upon  every  bene- 
fit which  it  confers  upon  the  producer.  It  does  this 
in  many  ways. 

By  eliminating  the  purely  speculative  middle- 
man and  dealing  directly  with  the  consumer,  the 
legimate  distributor,  or  the  manufacturer,  the  big- 
gest part  of  the  profits — an  entirely  unnecessary 
part — now  taken  out  in  the  present  sj'stem  of  dis- 
tribution, is  saved  to  the  farmer.  By  combination 
into  great  sales  units  much  of  the  present  legitimate 
overhead  expense  of  distribution  is  saved.  By  the 
ability  of  these  units  to  secure  cheaper  money  for 
distribution  credits  for  the  farmer,  the  difference 
in  interest  is  saved.  By  efficient  distribution,  doing 
away  with  the  glutted  markets  and  their  conse- 
quences of  rotting  food  both  in  the  markets  and 
in  the  fields  other  great  wastes  are  saved.  By  proper 
warehousing,  proper  processing,  proper  forms  of 
transportation,  the  present  complete  destruction  of 
much  wealth  each  year,  due  to  inefficiency  in  these 
matters,   is  saved. 

The  extent  of  these  savings  in  many  instances 
can  be  imagined  when  it  is  truthfully  told  that  co- 
operative associations  have  frequently  succeeded  in 
doubling  the  farmer's  return  for  a  given  product 
without  raising  the  price  of  that  product  to  the 
consumer  one  cent.  The  result  in  these  cases  has 
been  a  double  production  and  the  consuming  world 
has  absorbed  that  production  for  the  reason  that 
the  co-operative  association  can  and  must  share 
some  of  its  savings  with  the  consuming  public. 

There  are  various  ways  of  doing  this.  It  is  true 
that  in  only  a  part  of  the  cases  will  you  find  the 
consuming  public  given  cheaper  prices  on  the  pro- 
duct. While  frequently  the  case,  that  is  only  abso- 
lutely necessary  where  the  product  has  already  been 
merchandised,  by  competent  manufacturing  interests 
of  a  non-speculative  character,  to  its  fullest  values. 
Very  few,  if  any,  such  products  exist. 


22  American    Cotton    Growers   Exchange 

The  way  in  which  the  sharing  is  mostl}*  done  is 
by  increasing,  through  good  merchandising,  the  value 
of  the  product  to  the  consumer.  He  does  not  neces- 
sarily pay  less  money,  but  gets  a  thing  of  greater 
value  for  his  money.  Otherwise,  as  I  have  tried 
to  drive  home  again  and  again,  he  would  not  in- 
crease his  use  of  the  product. 

When  you  grade  a  product  so,  for  example,  that 
the  consumer  can  get  exactly  what  he  wants  and 
does  not  have  to  take  with  it  a  lot  of  junk  that  he 
does  not  want,  you  are  increasing  the  value  of  that 
product  to  the  consumer.  When  you  make  it  whole- 
some and  attractive  in  form,  when  you  furnish 
guarantees  of  quality  with  it,  when  you  educate  him 
to  a  score  of  uses  that  lie  in  that  product  which  he 
did  not  know  before,  you  very  distinctly  increase 
its  value  to  him.  And  unless  you  can  make  him 
recognize  that  increase  of  value  by  such  methods 
you  must  give  him  the  product  for  less  money. 
There  is  no  other  way  out. 

Remember  this:  The  co-operative  association, 
being  composed  entirely  of  producers,  has  got  to 
sell  all  of  the  crop.  The  speculator  does  not  care 
whether  the  crop  is  sold  or  not — he  is  interested  only 
in  the  part  he  cares  to  handle.  For  all  he  cares, 
it  can  rot  in  the  producer's  hands  and  the  consumer 
can  starve,  a  situation  which,  in  fact,  helps  him  to 
pay  the  producer  little  and  charge  the  consumer 
much.  He  is  not  interested  in  volume;  he  is  inter- 
ested only  in  the  profit  margin. 

But  perhaps  the  greatest  contribution  of  all  that 
co-operative  marketing  makes  to  the  value  of  the 
product,  from  the  consumer's  viewpoint,  is  its  tend- 
ency to  stabilize  those  values.  Your  manufacturing 
consumer,  for  example,  will  use  the  product  to  much 
greater  extent,  and-  can  afford  to  manufacture  it 
for  final  consumption  on  a  much  narrower  margin 
of  profit,  when  he  can  place  greater  reliabliity  upon 
the  probable  cost  of  his  raw  material  than  he  is  able 
to   place   today. 

It  may  not  be  generally  known,  but  the  American 
Cotton  Manufacturers  Association,  for  example,  at 
its  last  conventien   roundly   and   unequivocably   in- 


American    Cottom    Growers    Exchange 23 

dorsed  the  cotton  co-operatives,  saying  that  the 
manufacturers  association  "commends  the  co-opera- 
tive marketing  idea  in  the  South's  greatest  crop  as 
a  step  that  will  tend  to  assure  an  adequate  supply 
and   at   fair   prices." 

Taking  part  of  the  gamble  out  of  the  manu- 
facture of  farm  products  means  taking  part  of  the 
gamble  out  of  the  life  of  the  ultimate  consumer. 
The  whole  tendency  of  co-operative  marketing  is 
to  stabilize  prices  all  down  the  line,  and  no  greater 
blessing  can  be  conferred  upon  the  average  American 
citizen,  who  is  in  real  distress  frequently  through 
the  violent  fluctuation  in  prices  that  we  have  today 
on  the  commonest  necessities  of  life. 

If  a  shirt,  for  example,  is  to  cost  $1.00  or  $3.00, 
no  great  harm  results  if  the  shirt  will  only  stay 
very  close  to  that  price,  because,  our  whole  economic 
structure,  wages,  rents,  everything  else,  adjusts  itself 
gradually  to  any  fixed  value  for  a  necessity  of  life. 
There  is  real  hardship  when  the  shirt  jumps  up 
and  down  more  rapidly  than  such  an  adjustment 
can  take  place. 

Even  without  consideration  of  the  fact,  to  be 
dealt  with  later,  that  almost  every  consumer  is  a 
producer  as  well,  and  the  farmer  part  of  his  market, 
co-operative  marketing  is  still  a  great  blessing  to 
the  consumer,  strictlv  as  a  consumer. 


24 American    Cotton    Growers   Exchange 

VIII 
The   Only  People   Who  Don't  Like  It 

I  SPOKE,  in  the  last  article,  of  the  hearty  indorse- 
ment with  which  the  co-operative  marketing 
associations  frequently  met  from  the  manufacturing 
interests  preparing  the  raw  product  with  which 
they  deal  for  final  consumption,  and  gave  a  good 
hint  of  the  reasons  lying  back  of  their  attitude. 

People  still  governed  by  the  antiquated  idea  that 
the  main  slogan  of  co-operative  marketing  is,  "elimi- 
nate the  middleman,"  will  be  amazed  to  learn  that 
your  modern  co-operative  marketing  association  more 
frequently  than  not  has  the  hearty  sympathy  of 
many  middlemen  in  its  field.  In  the  majority  of 
cases,  due  to  the  superiority  of  the  product  which 
their  merchandising  methods  evolve,  the  co-operative 
association  is  looked  upon  with  decided  favor  by  the 
retail  merchant,  and  frequently  by  the  wholesaler 
and  the  jobber  who  supplies  him,  and  by  the  non- 
speculative  broker. 

That  is  because  modern  co-operative  marketing 
draws  the  distinction,  which  I  indicated  in  a  previ- 
ous article,  between  distributive  and  speculative 
middlemen.  There  is  no  such  thing  as  totally  elimi- 
nating the  legimate  middleman.  He  is  himself  an 
essential  producer.  He  produces  a  service  which  is 
necessary  in  the  distribution  of  a  product.  Where 
he  is  a  legimate  merchant  he  himself  is  engaging, 
to  a  certain  extent,  in  the  merchandising  methods 
which  make  for  the  increased  and  wider  consump- 
tion that  is  the  aim  of  your  producer's  organization. 
In  order  to  perform  that  service  for  itself  the  co- 
operative association  would  have  to  acquire  the 
property  and  the  skill  represented  by  these  men. 
To  acquire  it,  it  must  spend  money,  and  to  borrow 
this  money  one  must  pay  an  interest  thereon  equiva- 
lent to  a  legitimate  profit.  Sometimes,  the  co-opera- 
tive associations  do  this,  but  they  pay  fair  prices 
for  plants  which  they  take  over,  and  fair  salaries 
for  the  services  which  they  displace. 

The  only  people  who  are   deprived   of   anything 
by    co-operative    marketing    are    the    speculators,    a 


American    Cotton    Growers   Exchange 25 

class  tremendous  in  wealth  and  power,  but  limited 
in  number,  and  little  known  to  the  general  public 
except  through  the  operations  of  some  of  them  upon 
the  big  exchanges;  because  your  real  speculative  mid- 
dleman, not  being  a  merchant,  but  purely  a  gambler, 
seldom,  if  ever,  advertises.  As  a  matter  of  fact  he 
rarely  ever  handles,  frequently  has  never  even  seen, 
an  actual  specimen  of  the  product  in  which  he  deals. 

Your  distributive  middleman  is  a  man  who  oper- 
ates upon  a  fixed  charge  for  services  rendered  ;  or, 
if  he  buys  and  sells  the  product,  figures  only  to  make 
a  fixed  profit,  equivalent  to  such  a  fair  charge,  that 
increases  only  with  the  volume  of  business  which 
he  handles.  Your  speculator,  on  the  other  hand, 
is  the  man  who  buys  and  sells  a  product  with  no  idea 
of  actually  moving  that  product,  but  merely  with 
the  idea  of  selling  it  again,  without  the  performance 
of  any  service,  on  the  highest  possible  profit  margin. 
It  is  an  essential  of  his  business  that  markets  fluctu- 
ate as  widely  and  as  rapidly  as  possible,  that  there 
should  be  as  many  sales  and  resales  of  the  product 
as  possible,  and  there  should  be  a  surplus  at  the 
producing  end  from  which  he  buys  and  a  shortage 
at  the  consuming  end  to  which  he  sells,  as  marked 
as  possible. 

The  speculators,  as  a  class,  have  interests  inimical 
to  all  other  classes,  and  they  are  the  only  class  that 
is  hurt  by  co-operative  marketing.  Even  in  their 
case,  co-operative  marketing  confiscates  no  property 
which  they  may  be  using  as  legitimate  distributors 
on  the  side,  and  confiscates  no  past  profits.  It  mere- 
ly says,  "If  you  have  got  to  gamble,  you  will  have  to 
do  your  gambling  elsewhere.  We  have  decided  to 
change  this  field  into  a  business  desk  instead  of 
a  poker  table." 

As  large  as  are  the  profits  which  these  speculative 
interests  have  in  the  past  taken  out  of  our  farm  pro- 
duce, I  wish  to  point  out  again  that  these  profits 
themselves  are  merely  a  very  minor  part  of  the 
saving  \\-hich  co-operative  marketing  effects  by  mak- 
ing it  possible  to  ignore  the  speculator.  I  wish  I  had 
the  opportunity,  which  the  space  afforded  me  here 
does  not  give,  to  take  the  price  stabilizing  eficct  alone 


American    Cottom    Growers   Exchange 


of  powerful  co-operative  marketing  associations  and 
analyze  its  values  to  the  various  different  phases 
of  American  business. 

For  example,  just  think  of  what  they  mean  to 
conservative  financial  interests.  Agricultural  loans 
today  absorb  a  tremendous  part  of  the  fluid  banking 
resources  of  the  country  in  the  form  of  that  money 
which  seeks  a  high  profit  making  rate  of  interest 
because  it  can  afford  to  take  some  chances  to  attain 
it.  Agricultural  loans  today  are,  for  the  most  part 
out  of  the  field  for  the  investment  of  that  class  of 
money  which  refuses  to  take  any  chance  and  is  now 
locked  up  in  limited  classes  of  bonds  and  in  real 
estate. 

These  co-operative  marketing  associations  are 
tending  gradually  to  establish  agricultural  loans  as 
a  field  for  absolutely  safe  investment.  They  are 
gradually  drawing  out  into  circulation  the  capital 
that  is  now  static  by  investment  in  unproductive 
values,  and  releasing,  for  the  development  of  all 
American  industry,  part  of  the  profit-seeking  funds 
that  are  now  absorbed  in  financing  speculative  opera- 
tions in  agricultural  products. 

This  is  deep  economic  water  and  I  am  going  to 
get  out  of  it  and  stay  out  of  it  for  any  further  re- 
marks in  a  series  intended  for  popular  reading  like 
this.  But  I  hope  this  little  journey  into  a  by-path 
may  have  given  a  hint  to  the  scientific  economist 
that  will  lead  him  into  an  independent  investigation 
and  comment  upon  co-operative  marketing  that  will 
establish  in  the  scientific  mind  an  appreciation  of 
the  overwhelming  importance  and  promise  of  this 
movement. 


American    Cotton    Growers   Exchange  27 


IX 

Unii'orked  Gold  Mines  For  You  In  American 
Agriculture 

THE  average  mone.v  income  of  the  million  or 
more  cotton  farmers  of  the  South  for  the  five 
years  ending  in  1920  was  about  $320.00  a  year. 
The  average  income  of  the  tobacco  farmers  was  less 
than  $400.00  a  year,  of  which  about  $240.00  came 
from  tobacco,  and  the  rest  from  truck  raised  upon 
the  average  farm.  How  would  you  like  to  support 
a  family  of  five  upon  that? 

And  that  is  not  the  question  that  you  are  to  be 
chiefly  interested  in  here.  How  do  you  expect  to 
sell  goods  in  a  strictly  agricultural  section  of  the 
United  States  where  the  average  income  is  as  small 
as  that?  And  the  Southern  farmer  while  he  is  the 
poorest  of  the  lot  is  not  the  only  poor  farmer  in 
America.  All  the  farmers,  except  those  that  have 
been  lifted  out  of  the  slough  by  correct  co-operative 
marketing  already,  are  comparatively  poor. 

There  are  wealthy  farmers,  but  in  practically 
every  instance  it  will  be  found  that  they  have  made 
their  money,  not  from  farming,  but  in  some  other 
field  of  business,  or  over  a  long  period  of  years, 
from  the  increase  in  land  values  which  has  come 
about,  not  because  of  any  increased  prosperity  in  the 
farming  industry  but  because  of  the  industrial  or 
transportation  development  of  nearby  communities. 

On  the  whole,  as  I  have  said  before,  the  average 
standard  of  living  for  the  farmer  is  tw"enty  years 
behind  the  times.  If  you  want  to  know^  the  great- 
est benefit  of  co-operative  marketing  to  you,  the  con- 
sumer of  farm  products,  then  stop  long  enough  to 
reverse  the  attitude  of  regarding  yourself  strictly 
as  a  consumer.  \  ou  are  also  a  producer,  and  the 
farmer  to  you  is  your  consumer — nearly  50%  of 
your  consumer  in  these  United  States. 

Co-operative  marketing,  which,  as  I  have  shown, 
takes  nothing  from  your  own  welfare,  is  the  only 
thing  that  can  improve  the  material  prosperity  of  the 
farmer  and  make  him  a  worth-while  customer  for 
j'our  goods. 


28 American    Cotton    Growers   Exchange 


Here  is  another  thing  to  be  considered.  I'he 
principal  export  commodities  of  this  country  are 
agricultural  commodities.  This  is  especially  true  of 
the  great  staples.  Cotton  is  far  and  away  the  lead- 
ing export  product  of  the  United  States.  This 
means  that  the  increase  in  the  producer's  return, 
which  he  will  receive  through  co-operative  market- 
ing, docs  not  come  solely  from  this  country,  but 
from  the  ends  of  the  earth.  And  since  the  only  thing 
that  the  farmer  can  do  with  his  money  is  to  spend 
it,  that  increase  in  return  is  poured  out  over  the 
whole  United  States,  which  includes  you,  in  a 
golden  flood.  Surely  this  is  simple  enough  a  propo- 
sition to  require  no  further  explanation  or  demon- 
stration. 

There  are  other  important  matters  to  be  con- 
sidered, however,  in  this  regard.  It  is  not  only  that 
co-operative  marketing  tends  to  increase  the  price 
return  on  exported  agricultural  commodities  but  it 
tends  to  increase  the  export  volume  of  commodities 
and  particularly  those  commodities  which  are  less 
frequently  sold  for  export  today.  The  improved 
processing  and  other  merchandising  methods  that 
are  the  necessary  accompanient  of  co-operative 
marketing  appeal  to  the  foreign  consumer  as  well 
as  to  the  consumer  at  home.  Some  of  your  modern 
co-operatives  do  extensive  foreign  advertising  and 
are  steadily  building  up  a  large  foreign  market  for 
themselves.  They  succeed  in  doing  this  often  even 
where  there  is  an  extensive  and  cheaper  foreign  sup- 
ply, through  the  superiority  of  the  product  which 
they  put  out.  As  I  pointed  out  before,  the  present 
agricultural  prosperity  of  Denmark  is  due  to  the 
ability  which  the  Danish  co-operatives  have  given 
the  Danish  dairy  farmer  to  compete  with  his  pro- 
duct in  the  markets  of  the  outside  world. 

And,  again,  you,  as  a  manufacturer,  as  a  merchant, 
as  a  worker  in  one  field  or  another,  if  you  are  a 
progressive  citizen  and  a  sincere  contributor  to  civili- 
zation and  progress,  are  interested  not  only  in  the 
money  return  to  you,  at  the  moment,  from  the  field 
of  work  that  you  live  and  are  engaged  in,  but  are 
interested  in  the  development  of  new  opportunities 


American    Cotton    Growers   Exchange  29 


for  the  extension  of  your  own  line  of  endeavor. 
The  agricultural  prosperity  of  an  agricultural  sec- 
tion does  not  mean  merely  the  development  of  its 
agriculture,  but  the  development  of  all  kinds  of 
commerce  within  that  realm.  And  there  are  sec- 
tions of  this  country  today  depending  chiefly  upon 
agriculture,  and  now  in  abject  poverty  for  that 
reason,  which  are  capable  of  development  into  the 
garden  spots  of  this  earth. 

The  South,  practically  crushed  by  the  Civil  War, 
has  never  really  risen  from  that  blow.  Those  of  the 
North  and  West  do  not  and  cannot  appreciate  this 
until  they  have  spent  the  time  among  the  rural  dis- 
tricts of  the  South  that  it  has  been  my  privilege 
to  spend  within  the  past  three  years.  Your  far- 
famed  "Dixie"  possesses  the  greatest  agricultural 
possibilities  on  this  earth  and  is  in  addition  blessed 
with  practically  every  other  natural  resource  to 
man.  Its  development  into  the  greatest  market  of 
this  country  awaits  only  the  full  development  of 
its  agriculture  through  successful  co-operative 
marketing. 


30 American    Cotton    Growers   Exchange 

X 

Creating  The  Highest  Type  of  Rural  Jrnerican 
Citizenship 

THE  Georgia  cracker  sometimes  reveals  a  sar- 
donic sense  of  humor.  One  of  them,  approached 
by  a  stranger  with  whom  he  deigned  to  carry  on  a 
laconic  conversation  while  guiding  the  footsteps  of 
his  only  mule  through  his  cotton  patch,  was  asked 
*'Tell  me,  Bill,  what  do  you  raise  in  these  parts?" 

"Wall,"  he  drawled,  "just  about  three  craps." 

"What  are  they?" 

"Cotton,  niggers,  and  hell." 

Your  American  farmer  is  never  by  nature  a  "hell- 
raiser."  Down  in  his  heart,  he  is  fundamentally 
the  most  docile  and  least  radical  being  on  earth. 
He  listens  to  radicalism,  he  is  comparatively  radical 
in  American  politics  today,  and  he  carries  a  grouch 
and  a  slight  tendency  to  go  off  after  wild  leader- 
ship, only  because  heretofore  constructive  leadership 
has  offered  him  nothing  substantial,  and  the  radical 
always  presents  to  the  untutored  mind  the  more 
glowing  vision  of  hope,  coupled  with  the  larger 
element  of  entertainment. 

The  city  man  is  prone  to  complain  of  wild  theories 
regarding  money,  strange  political  nostrums,  sus- 
picion and  surliness  of  attitude,  and  unwillingness 
to  lend  himself  to  constructive  remedies,  on  the 
part  of  the  farmer  in  some  sections  of  this  country. 
As  a  matter  of  fact,  the  farmer  is  less  radical  and 
less  unapproachable  now,  considering  the  stage  of 
poverty  that  he  is  in,  than  any  other  class  of  our 
American  citizenship.  This  co-operative  market- 
ing movement,  sound  in  aim  and  conservative  in 
method,  as  well  as  difficult  for  the  ignorant  mind  to 
understand,  has,  in  the  very  extent  of  its  recent 
strides,  proved  the  fact  that  all  that  is  needed  to 
make  the  American  farmer  fit  to  be  the  leading  citi- 
zen, as  he  should  be,  o-f  a  fundamentally  agricultural 
country  such  as  this,  is  education,  and  education 
can  only  come  after,  not  before,  the  prosperity 
necessary  to  purchase  it. 


American    Cotton    Growers   Exchange 31 

Many  big  business  leaders,  many  big  statesmen, 
but  not  enough,  realize  that  in  its  tendency  to  destroy 
the  need  for  radicalism  alone,  this  co-operative 
marketing  movement  among  farmers  is  the  real 
salvation  of  this  country. 

It  is  the  real  and  solid  solution  of  many  grave 
problems,  the  present  congestion  of  some  of  our 
industrial  centers,  our  immigration  and  our  Ameri- 
canization problems,  among  them. 

We  are  told  that  America  would  welcome  a 
larger  per  centage  than  it  receives  of  the  Nordic 
type  of  immigrant  that  used  to  go  straight  to  our 
farms.  We  are  told  that  it  would  welcome  other 
tvpes  of  immigration  provided  that  immigration 
did  not,  as  it  is  alleged  to  do  today,  concentrate 
itself  in  more  or  less  foreign  communities  in  our 
great  cities,  and  would  hie  itself  to  the  American 
farm. 

You  can  accomplish  both  these  things.  You  can 
solve  our  immigration  problem  if  you  will  once  again 
make  the  American  farm  a  field  for  successful  en- 
deavor and  not  merely  a  lonely  gate  to  ruin. 

No  man  wants  to  immigrate  himself  into  an  in- 
dustry the  fruits  of  which  are  a  standard  of  living 
twenty  years  behind  of  his  fellows.  No  man,  who 
has  once  tasted  good  wages,  city  hours,  city  pleas- 
ures, wants  to  take  himself  back  to  the  gruelling 
rural  life,  when  the  rural  life  does  not  offer  a 
living  wage.  That  is  where  your  congested  indus- 
trial centers  come  from.  That  is  why,  for  the  first 
time  in  our  history,  our  last  census  revealed  that 
our  rural  population  had  become  less  than  our  urban 
population.  That  is  why  tenantry  is  increasing  so 
rapidly  upon  the  American  farm,  and  what  is  left 
of  our  rural  population  is  being  pounded  down  into 
a  class  of  serfs  comparable  to  that  of  feudal  times. 

Goldsmith  said  it  once  and  for  all  in  his  lines  that 
cannot  be  quoted  too  often:  "A  bold  peasantry, 
their  country's  pride,  when  once  destroyed  can  never 
be  supplied."  I  have  heard  a  paraphrase,  however, 
that  is  also  worth  thought.  It  runs:  "A  bold  peas- 
antry, their  country's  pride,  when  once  aroused  will 
never  be  defied." 


32  American    Cotton    Growers   Exchange 

The  destruction  of  the  American  farmer  will 
not  come  because  it  cannot  come.  The  whole  world 
needs  him  for  its  food  and  clothing.  But  unless  he 
is  to  be  destroyed,  something  has  got  to  be  done, 
and  done  immediately,  to  bring  him  material  pros- 
perity. 

Shall  it  be  some  wild  upheaval  that  he  leads 
blindly  but  in  the  might  of  his  misery  and  his  wrath  ? 
Or  shall  it  be  this  safe,  sane,  road  to  prosperity, 
destroying  nothing,  benefiting  everybody,  of  co-oper- 
ative marketing? 

Is  it  any  wonder  that  my  own  heart  and  soul, 
and  that  of  thousands  of  other  far-seeing  American 
citizens  today  is  wrapt  up  in  the  attainment  of 
this  goal — safe,  sound,  powerful — the  one  great 
economic  advance  of  our  times! 

Illlllllllllllinillllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll iiiiiiiiiiiiiiiiiiiiiiiiiiiiiuiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii:hi 

AMERICAN  COTTON  GROWERS 
EXCHANGE 

General  Office: 
Dallas^  Texas 

Sales  Office: 
Atlanta,  Georgia 

Carl  Williams  President 

B.  W.   Kilgore Vice-President 

C.  O.  Moser  Secretary-Treasurer 

iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiHiiniimiiiiiiiiiiiiiiiiiiiiiiiiiiii I iiiiiiiiiiiiiiiiii iiiiiiiiiiiiiiiii iiiiiiiiiiiiiiiiiiiiHiiiiiiiniiiiiiiiiiiiiii iiiiiiiiiiiiiiiiiiiiiiimiiiii 

DEPARTMENTS 

Legal  Aaron  Sapiro,  General  Counsel 

Sales  C.  B.  Howard,  General  Sales  Mgr. 

Offices  at  Atlanta,  Ga. ;  Charlotte,  N.  C;   Green-  1 

ville,    and    Spartanburg,     S.     C. ;     Boston,    Mass.; 
Bremen,    Germany;    Liverpool,    England;    Havre,  j 

France. 

Representatives    at   Barcelona;    Rotterdam; 
Copenhagen;    Vienna. 

Field  Service  C.  O.  Moser,  Director 

F.  R.  Shanks,  Chief  of  Eastern  Division. 
J.  D.  Coghlan,  Chief  of  Western  Division. 

Systems   D.   G.    Hill,   Jr.,   Director 

W.  R.  McCullough,  Assistant. 
F.  B.  Webster,  Assistant. 

Information  L.  F.  McKay,  Director 

Chas.    M.    Morgan,    Field    Representative. 


11^ 


)    : 


Ontario  Department  of  Agriculture 


ADDRESSES 


ON 


Co-operative  Marketing 


BY 


MR.  AARON  SAPIRO 

San  Francisco,  California. 


HON.  MANNING  W.  DOHERTY 

Minister  of  Agriculture  for   Ontario. 

HON.  E.  C.  DRURY 

Prime  Minister  of  Ontario. 


TORONTO : 
Printed  and  Published  by  Clarkson  W.  James,  Printer  to    the  King's  Most  Excellent  Majesty 

1922 


MR.  AARON  SAPIRO  AND  HIS  MESSAGE 


Duriiiu'  \\'v  week  oL'  IMarcli 
6,  192'^,  a  :;orie.s  of  addresses  on 
co-operative  marketing  were  de- 
livered in  the  Province  of  Ontario 
by  Mr.  Aaron  Sapiro  of  San 
Francisco,  California,  and  the 
Minister  of  Agricnltnre  for 
(Ontario. 

As  is  well  known,  co-opera- 
tive niarketino-  has  been  devel- 
oped to  the  highest  point  of  suc- 
cess on  the  Paciiic  Coast  during 
the  past  few  years.  An  organiza- 
tion on  a  commodity  basis  with 
three  to  five  year  contracts  con- 
trolling a  large  ]^ercentage  of  the 
commodity  has  lieen  tbe  plan 
followed.  Ill  thi<  way  ])roducers 
have  effected  the  marketing  of 
ihcir  own  i)roducts  to  ihc  extent 
of  Ibi'i'c  hundred  million  dollars 
aiinnally,  and  the  result  has  been 
not  only,  satisfactory  to  the  pro- 
ducers but  to  the  consumers  and 
to  the  country  in  general.  One 
of  the  most  outstanding  men  in  bringing  about  the  organization  and  successful 
operation  of  many  companies  is  Mr.  Aaron  Sapiro.  He  has  assisted  in  the 
organization  of  a  great  many  of  the  companies,  and  has  acted  as  legal  and  general 
adviser  so  that  he  has  become  recognized  as  one  of  the  most  reliable  authorities 
on  co-operati\e  marketing  under  present  day  conditions.  Added  to  this  great 
store  of  first  hand  information  and  experience,  he  possesses  a  lucid  aiul  attractive 
style  of  deli\ery.  His  addresses  on  co-operative  marketing  in  this  province.  ther(?- 
"fore,  constitute"  a  very  important  addition  to  the  current  literature  on  the  subject 
and  are  deserving  of  the  careful  study  of  thousands  of  people  who  could  not 
bear  his  personal  message  as  well  as  by  those  who  were  fortnnate  enough  to  hear 
bim.  Accordingly,  two  of  the  addresses  which  arc  lypical  of  the  information 
aiid   sngg'Ostions  offered,   arc   herewith    pre.'^ented. 


i 


BENEFITS  OF  CO=OPERATION  DEFINED 


Merchandising  Rather  Than   Dumping  is  Keynote  of  California    Plan    Which  Would 

Also  Apply  in   Ontario 


111  his  address  in.  Convocation  Hall,  TorontO;  Mr.  Sapiro  said: 
When  the  average  city  man  hears  about  co-operative  marketing  his  first 
thought  is,  ''That  is  another  of  those  farmer  things,'^  aud  he  dismisses  it  from 
his  mind,  and  doesn't  waste  any  more  thought  on  it.  And  just  because  of  that 
attitude  the  average  man  is  responsible  for  the  slow  development  of  co-operative 
marketing  both  in  Canada  and  in  the  United  States.  It  takes  the  thinking  man, 
or  the  man  who  has  had  calamity,  to  realize  that  the  United  States  and  Canada 
are  both  primarily  agricultural  countries,  and  that  they  cannot  be  prosperous  uti- 
less  agriculture  is  prosperous. 

A  Great  Awakening 

Our  American  business  men  have  suddenly  awakened  to  the  fact  that  in  order 
for  them  to  have  prosperity  they  have  to  help  the  farmer  to  become  prosperous. 
But  the  farmers  of  the  United  States  are  not  asking  the  business  men  to  do  any- 
thing for  them.  They  are  asking  the  business  men  to  step  out  of  the  way  so  that 
they  can  organize  themselves,  so  tliat  they  can  do  something  for  themselves  and 
bring  themselves  up  to  the  same  plan  of  'business  efficiency  and  business  organiza- 
tion that  the  ordinary  industry  now  has. 

WTien  your  business  men  and  the  people  in  the  cities  begin  to  realize  that 
the  farm  problem  is  their  problem,  you  are  going  to  find  a  change  in  the  type  of 
agriculture  and  a  change  in  the  handling  of  the  problem;3  of  agriculture.  If  the 
people  of  the  cities  refuse  to  recognize  that  their  interests  are  inseparable  from 
the  interests  of  agriculture  it  will  hold  your  Province  back  and  hold  the  whole 
of  Canada  back.  Look  at  what  happened  in  the  United  States?  We  were  so 
very  slov/.  Xearly  every  civilized  country  in  the  world  has  had  co-operative 
marketing  by  the  farmer  for  more  than  two  generations.  The  United  States 
and  Canada  happen  to  be  the  two  baclcward  ones.  In  countries  like  Deiwuark 
they  have  had  co-operative  marketing  of  farm  products  for  more  than  fifty  years. 
In  the  dairying  industry  more  than  ninet}'  per  cent,  of  their  farmers  are  com- 
pletely and  co-operatively  organized,  and  in  poultry  and  livestock  they  are  or- 
ganized to  the  extent  of  over  85  per  cent.  In  Germany,  France,  Australia,  Italy. 
Switzerland,  even  in  Russia  and  Roumania  the  growers  have  learned  how  to  co- 
operate, not  merely  to  co-operate  in  marketing  but  to  co-operate  in  credits  and  other 
rypes  of  problems. 

But  for  years  the  United  States  and  Canada,  nations  that  are  characterized 
by  strong  individuality,  stood  back  and  let  the  Danish  farmers  take  the  cheese 
market  of  England  away  from  the  Ontario  farmers,  although  the  Ontario  far- 
mers boast  that  they  produce  the  best  cheese  in  the  world. 


What  Happened  in  the  Cotton  Industry 

'J'iikc  wlial  has  happpciicd  in  the  cotton  industi-y.  We  liave  in  tlie  United 
Stah's  ii'i  iiiiliistry  liy  whiili  we  produce  two-thirds  of  all  the  cotton  in  the  world,  a 
staple  non-perisihahle  ai'ticie  li'ivino"  us  what  would  amount  to  a  conmu^'cial  mono- 
|)olv  of  this  lii^u'ii  tvpe  product.  Wv  ha\e  Ikhmi  |)roduciii^u'  it  decade  after  decade 
and  in  tiu'  same  districts.  Vou  would  inia.^iiie  that  these  larniers  must  have 
made  some  money  hecause  the  men  who  sell  you  cotton  g'oods  ^i'et  a  I'airly  good 
price,  and  you  have  known  of  cotton  exchange  nullionaires  and  mill  men  who 
have  left  enormous  fortunes  for  their  children.  Cotton  lias  proliahly  always  .meant 
wealth  to  vou.  1  would  like  you  to  see  the  cotton  farmers.  There  are  several 
millions  (d'  them  in  the  southern  section  of  the  I  nited  States,  and  they  live  in 
a  statue  of  poverty  such  as  you  never  dreamed  of — a  stage  two  generations  hehind 
what  you  have  Ivere  in  the  city  of  'I'oronto.  You  can  go  to  South  Carolina  and 
see  homes  where  the  whole  fannly  li\es  in  one  room  where  perhaps  for  the  whole 
year  no  one  has  a  pair  of  shoes  or  stockings ; ;  where  they  have  to  take  the  little 
children  and  put  them  out  to  work  in  the  field  and  caniu)t  give  them  any  sc^iool- 
ino-.  There  are  districts  where  the  wliole  county  cannot  raise  enimgh  in  taxes 
to  put  in  a  decent  road  or  a  school,  or  put  up  a  decent  church  :  where  to  family 
after  family  all  their  days  are  passed  in  gloom  and  lu>pelessness ;  where  tenantry 
is  increasing,  where  the  standard  of  living  is  going  down.  And  yet  these  very 
people  are  producing  one  of  the  greatest  agrieuiltural  crops  of  tlie  world  which 
makes  millionaires  every  single  year  in  New  York,  in  Xew  England  and  in  old 
England.  You  avouM  think  it  a  most  amazing  thing  to  realize  that  the  average 
familv  income  in  South  Carolina,  in  producing  cotton,  is  less  than  $301)  a  year, 
including  the  higher  war  years,  for  the  last  ten  years.  It  is  the  most  amazing 
thing  I  have  ever  known  in  my  life  to  realize  how  this  great  and  valnahile  crop, 
one  of  the  greatest  on  the  North  American  continent,  can  create  so  nnich  wealth, 
can  take  .so  miich  out  of  the  consumer  and  leave  so  little,  either  in  money,  in 
happiness  or  in  decency  of  living  for  the  man  who  ])rimarily  created  that  wealth. 

Producers  Have  Been  Stung  into  Action 

Now,  in  the  United  States  we  ha\e  heen  stung  into  the  net-essity  for  studying 
that  prohlem.  We  have  seen  the  po|)ulation  moving  from  the  country  to  the  city, 
and  the  11)"30  census  showed  for  the  first  time  that  the  urhan  population  of  the 
United  States  was  greater  than  tlie  rural  po])ulation.  Young  men  and  women 
will  not  stay  on  the  farms  hecause  it  not  only  does  not  pay  them  anything,  not 
to  speak  of  wholesome  recreations  or  an^dhing  that  means  ordinary  comfort.  They 
will  go  anywhere  except  stay  i^n  the  farm.  Tenantry  is  inoreasina'  all  ov"r  th{' 
United  States,  and  in  this  day  when  we  hoast  ahout  our  freedom  we  have  to 
recognize  the  fact  that  the  drift  in  that  country  is  toward  a  system  of  practically 
feudal  farming,  in  addition  to  that  the  standards  of  living  are  going  down  in 
the  farming  districts  instead  of  going  up. 

You  must  not  think  that  hecause  a  large  numher  (d'  American  fanners  (^wn 
Fords  that  they  have  automohiles  in  the  siense  that  citv  peojde  have.  The  Ford 
to  the  farmer  is  simply  his  street  car,  his  ])ul)lic  utility.  The  farmers  are 
separated  and  in  order  to  get  around  they  must  have  some  kind  of  a  wagon  or 
some  kind  of  a  Ford.  Do  not  think  that  because  Ford  can  sell  cars  to  a  gr-at 
many  farmers  in  the  Ignited  States  that  the  farmers  are  living  on  a  high  jjlaiie. 
Much  more  than  one-half  of  the  farmers  in  that  countrv  are  living  on  a  jilane 
A^diich  is  at  least  one  generation  below  the  idaiie  of    the    average    trained    worker. 


in  the  small  American  cities.  That  is  the  situation  in  the  United  States,  and 
I  speak  of  the  United  States  because  I  know  more  about  it,  and  not  because  the 
United  States  exclusively  has  that  problem  or  lia.s  that  situation  to  face. 

What  Happened  in  California 

,  Now,  we  had  that  situation  in  California,  in  fact  we  had  it  worse  than  in 
all  the  other  States  of  our  Union  because  we  were  so  far  away  from  markets. 
We  were  away  on  the  Pacific  coast,  and  everything  we  produced  had  to  be  carried 
thousands  of  miles  to  those  who  were  to  eat  it.  We  had  the  problem  to  a  worse 
extent  than  anywhere  else.  The  farmers  had  begun  to  think  that  the  only  thing 
they  could  do  was  to  live  on  the  climate  and  on  the  tourists  attracted  by  the 
climate,  but  they  realized  that  it  was  hopeless  to  try  and  live  on  a  California 
farm.  But  some  of  their  leaders — the  farm  leaders  not  the  state  leaders — began  to 
study  and  ask,  "Isn't  there  some  way  out,  something  that  farmers  have  done  some- 
where or  learned  that  Ave  can  use  for  our  California  farms  and  save  ourselves  from 
absolute  ruin?"  It  so  happened  that  some  men  did  know  about  Denmark  and  a 
section  of  Piedmont  in  Italy,  and  about  France  and  Germany,  and  so  they  began 
to  experiment  as  to  what  they  could  do  toward  farmer's  co-operative  marketing. 
Some  of  the  men  abo  knew  what  the  English  people  had  done  in  a  co-operative 
"way.  They  soon  learned  that  you  can  not  have  the  same  kind  of  co-operation  in 
a  producing  country  that  you  have  in  a  country  that  is  chiefly  a  consuming  one. 
Some  started  the  consumers'  stores,  that  they  might  make  tiny  savings  in  pur- 
chases; but  we  have  learned  that  consumers'  stores  are  just  scratching  the  prob- 
lem. The  chief  thing  is  to  give  the  farmer  a  purchasing  power  so  that  he  stands 
in  the  same  position  as  others  and  can  buy  in  the  markets  of  the  world  at  a  fair 
price.  So  we  ?4;arted  out  under  the  Rochdale  system  of  consumers'  stores  and 
failed.  We  had  hit  on  nothing  fundamental.  Some  of  the  farmers  who  had 
heard  about  Denmark's  experience  began  to  think  whether  that  system  could  be 
adapted  to  Californian  conditions,  and  gradually  they  worked  out  certain  plans 
under  which  they  could  adapt  the  Danish  system  of  selling  dairy  products  to  the 
California  system  of  selling  fruit.  California  became  a  huge  laboratory  for  Avork- 
ing  at  this  marketing  problem.  We  had  at  least  ten  failures  for  every  success, 
and  we  had  to  experiment  a  great  deal  to  figure  a  way  to  incorporate;  there  was 
the  question  of  tying  the  growers  to  long  term  contracts,  and  so  on.  All  our  Cali- 
fornia work  was  pure  experiment  for  many  years.  Take  the  orange  growers.  They 
started  a  movement  in  1894  by  forming  a  few  local  associations  in  which  the 
growers  of  oranges  in  that  vicinity  would  get  together,  erect  a  joint  packing  house 
and  grade  their  oranges.  They  would  then  elect  a  manager  who  was  supposed  to 
be  the  greatest  man  in  that  locality,  and  would  then  start  to  sell  oranges. 

It  Took  Twelve  Years  to  Correct  a  Blunder 

It  took  us  twelve  years  to  discover  the  fatal  blunder  of  that  system,  because 
these  local  associations  sprang  up  like  mushrooms  all  over  the  state,  and  we  had 
all  these  local  managers  trying  to  market  their  products  co-operatively.  They 
would  hear  that  the  orange  market  in  Kansas  City  was  low  in  supply  and  that  in 
Chicago  was  pretty  full,  and  the  local  manager  in  Los  Angeles  and  Santa  Anna, 
etc.,  would  scratch  his  head  and  say:  "I  am  going  to  be  a  smart  manager;  I  am 
going  to  ship  my  oranges  to  Kansas  City,  and  I  won't  say  a  word  to  the  other 
managers  so  they  won't  know  what  I''m  doing."  Of  course  every  other  manager 
would  get  the  same  information,  and  every  wise  local  manager  would  reach  the 


same  conclusion,  and  within  the  next  twenty-four  hours  they  would  all  be  ship- 
ping into  Kansas  City.  They  would  all  get  their  oranges  to  Kansas  City  within 
forty-eight  hour  of  each  other  and  the  Kansas  City  market  would  collapse  utterly. 
They  would  not  he  able  to  get  the  cost  of  freight  out  of  their  shipments,  and  the 
oranges  would  rot  on  the  cars  while  the  Chicago  market  would  be  absolutely  bare. 
Do  you  know  our  farmers  were  so  slow  that  they  had  to  be  bumped  like  that  for 
twelve  years  before  they  suddenly  realized  that  they  had  the  wrong  type  of  co- 
operative marketing.  The  local  association  is  good  for  the  consumer  association, 
but  when  you  start  out  to  market  your  product  you  have  to  organize  by  the  com- 
modity and  not  merely  by  locality. 

Organize  on  the  Basis  of  Commodity 

We  learned  that  first  great  principle  that  when  you  have  to  sell  something 
you  must  organize  on  the  hasis  of  the  commodity.  Our  growers  woke  up  and  'be- 
gan to  federate  all  these  locals  together,  and  to-day  the  California  Fruit  Grrowers 
Association  has  more  than  twenty  local  federations  in  the  twenty  districts,  and 
more  than  73  per  cent,  of  the  oranges  leaving  California  are  routed  out  through 
one  office  in  Los  Angeles.  In  a  moment  they  will  tell  you  how  many  carloads-  of 
oranges  there  are  in  any  city  in  the  United  States  and  Canada.  They  know  a 
city's  capacity,  and  if  a  city's  capacity  is  twenty  cars  in  one  week  and  there  are 
five  cars  there  and  Florida  has  ten  cars  moving  into  that  city,  and  they  have  ship- 
ped ten  carloads  to  that  city,  they  will  only  let  five  carloads  reach  there  and  will 
divert  the  other  five  to  some  other  city  .so  that  no  city  gets  either  a 'glut  or  a 
famine.  They  keep  moving  into  every  one  of  these  cities  just  what  these  cities 
can  absorb  at  a  price  that  is  fair  under  current  market  conditions. 

But  what  they  have  done  with  oranges  is  only  one  thing.  They  decided  that 
the  system  would  work  with  other  products,  and  so  you  have  organized  in  Cali- 
fornia strawberry  exchanges,  oranges,  lemons,  grape  fruit,  pears,  apples,  peaches, 
cherries,  dried  fruits,  prunes,  small  beans,  lima  beans,  walnuts,  alfalfa,  honey, 
milk,  cheese,  butter,  olives  and  perhaps  a  few  other  things  I  am  overlooking. 
Except  in  live  stock  we  have  practically  started  organization  work  in  every  com- 
modity produced  in  California  except  those  controlled  by  the  Japs. 

California  Farmers  Handle  $300,000,000  ^^  orth  of  Products  Arnually 

California  farmers  are  to-day  handling  more  than  $300,000,000  of  products 
every  year  through  this  form  of  marketing  associgitions  without  a  single  dollar 
of  stock  in  outsiders'  hands,  without  a  single  dollar  of  outsiders'  products  and 
without  a  single  non-farmer  in  any  of  these  associations.  They  have  learned  how 
to  handle  agriculture,  and  the  80,000  farmers  in  California,  Avho  have  learned 
how  to  co-operate,  have  become  practically  the  most  prosperous  group  of  farmers 
in  the  United  States.  Here  is  a  rather  interesting  test  of  how  prosperous  they 
are.  Each  year  the  United  States  Department  of  Agriculture  published  a  list  of 
fifty  counties  in  the  whole  of  the  United  States  that  have  had  the  highest  net 
value  of  agricultural  products,  and  the  States  consider  themselves  lucky  if  they 
have  two  names  in  the  whole  list.  California  has  thirteen  eounties  out  of  the 
first  fifty  in  the  entire  United  States,  and  we  have  first  and  second  place,  and 
four  other  places  in  the  first  twelve.  In  short,  with  products  that  we  admit  are 
not  always  -  tlie  very  best,  and  with  everything  we  raise  from  two  to  three  thou- 
sand miles  away  from  the  consuming  markets,  the  California  farmer  has  a  larger 
proportion  of  net  return  from  his  products  than  in  any  other  three  States  of  the 


"United  States  combined.  The  California  fanners  are  the  one  group  of  agricul- 
turists in  the  United  States  who  managed  to  weather  the  storm  of  1920-1921,  as 
more  than  eighty  per  cent,  of  our  growers  actually  made  net  profits  from  their 
year's  work,  while  more  than  eighty  per  cent,  of  the  balance  of  the  farmers  of 
the  United  States  actually  lost  money  on  their  crops.  There  was  no  miracle  in 
this.  The  California  farmers  learned  the  method  by  which  this  can  be  done,  and 
those  who  have  been  studying  the  process  are  trying  to  find  out  what  are  the 
fundamental  reasons;  and  we  now  believe  we  can  understand  why  it  is  the  Cali- 
fornia farmer  has  created  prosperity  while  the  other  farmers  in  other  sections 
remained  poor  and  helpless.' 

The  reason  is,  first,  that  we  recognize  the  special  character  of  agriculture. 
(Agriculture  is  characterized  by  individual  production  and  all  other  industries 
the  characterized  by  group  production.  Everything  you  need  is  character- 
ized by  group  production  under  the  factory  system  except  agriculture, 
and  because  the  farmer  was  an  individualist  in  production  he  thought  he  had  to 
be  an  individualist  in  distributing  and  marketing.  So  he  tried  to  market  as  an 
individual.  But  marketing  is  not  an  individual  problem,  it  is  a  group  problem; 
because  no  man  can  market  intelligently  without  knowing  first  what  other  men 
have  produced,  without  knowing  the  absorbing  power  of  the  market,  without 
knowing  credit  conditions,  without  knowing  how  a  crop  should  be  held  and  orderly 
^distributed,  without  understanding  and  making  available  for  himself  existing 
tVansportation  facilities.  ISTo  individual  farmer  can  ever  do  that.  It  can  only 
be  done  by  the  group,  and  the  farmer  who  does  not  realize  that  marketing  is  a 
igroup  problem  will  be  a  failure  as  a  marketer  all  his  life. 

That  was  one  of  the  first  things  we  learned  in  California — that  all  other 
types  of  industry  are  characterized  by  group  production,  and  therefore  they 
normally  had  group  marketing;  but  that  farming  which  is  characterized  by  in- 
dividual production  has  to  have  co-operation  to  induce  it  to  do  group  marketing. 

"Dumping"  Stopped  and  Merchandizing  Substituted 

Then  we  discovered  one  outstanding  principle:  That  the  great  contribution 
of  co-operative  marketing  was  that  it  stopped  the  dumping  of  agricultural  pro- 
ducts and  substituted  merchandizing  of  agricultural  products.  What  do  we  mean 
by  dumping?  Let  us  take  the  cotton  farmers  again.  And  when  I  speak  of 
farming  I  hope  3^ou  will  be  thinking  of  cheese  and  butter  and  some  of  the  things 
you  know  about  a  good  deal  more  intimately  than  I  do.  The  farmer  raises 
cotton  and  picks  it  over  a  period  of  two  or  three  months.  He  may  pick  a  bale 
now  and  another  in  two  months  and  another  in  three  months.  Each  farmer,  as 
soon  as  he  picks  his  cotton  and  has  a  bale,  brings  it  to  the  street  buyer  to  sell.  He 
Jmows  nothing  about  the  grade  of  the  cotton,  nothing  about  its  quality  or  tensile 
strength  or  any  of  the  factors  that  enter  into  its  value.  He  comes  there  and  throws 
his  cotton  on  the  market  against  every  other  farmer  bringing  in  cotton  that  day. 
The  street  buyer  may  only  want  to  buy  two  or  three  bales  of  cotton,  and  fifty  farm- 
ers will  be  fiocking  around  urging  him  to  take  their  cotton.  He  quotes  the  lowest 
price  he  can  because  each  farmer  has  dumped  his  cotton  on  the  market  and  broken 
the  price,  against  each  other.  The  American  farmers  usually  throw  on  the  mar- 
ket within  a  period  of  ninety  days  more  than  seventy  per  cent,  of  the  entire  cotton 
crop,  although  they  know  that  it  is  used  by  the  spindlers  in  an  average  even  ratio 
of  one  twelth  each  month.  They  throw  on  the  market  about  75  per  cent,  of  their 
crop  during  a  period  when  they  know  the  spindlers  are  ready  to  absorb  only  about 
thirty  per  cent,  of  that  crop. 


What  Breaks  the  Price  of  Cotton 

It  is  not  the  speculator  who  breaks  the  price  of  cotton.  It  is  the  grower. 
>Eaeh  man  dumps  his  cotton  against  the  other  man's  cotton,  and  the  speculator 
sim^ply  takes  advantage  of  the  situation.  He  merely  sits  there  and  takes  what  the 
grower  gives  him,  and  that  is  just  what  you  or  I  would  do  if  in  his  place.  We 
would  let  the  grower  break  the  price  and  buy  in  at  the  cheapest  possible  cost.  The 
grower  is  to  blame,  and  yet  he  cannot  do  anything  differently  when  he  stands  alone. 
He  is  in  just  the  same  position  as  your  cheesemaker— }'our  little  local  cheese  fac- 
tories that  you  have  throughout  the  Province,  making  their  cheese  and  throwing 
it  on  the  market  and  then  wondering  why  the  price  breaks  seven  cents  a  pound — 
from  twenty-one  cents  to  fourteen  cents — as  it  did  from  April  to  June  last.  They 
had  a  good  flow  of  milk  and  production  of  cheese  and  overloaded  their  own  market, 
dumpling  their  cheese  and  breaking  the  price  against  themselves.  The  speculator 
is  not  the  man  to  blame  for  that.  The  growers  unintentionally  are  their  own 
worst  enemy.  That  is  what  we  call  dumping  crops,  and  that  is  what  these  local 
managers  did  when  they  all  threw  their  oranges  into  Kansas,  oranges  from  all 
these  producing  points  breaking  the  price  against  each  other.  That  is  dumping 
crops.     That  is  throwing  crops  against  each  other. 

-  If  there  are  fifty  men  trying  to  sell  something  to  one  buyer  the  buyer  always 
names  the  price,  but  if  there  are  four  buyers  trying  to  buy  so^mething  from  one 
seller,  you  can  easily  see  who  will  name  the  price.  So  we  have  stopped  dumping 
agricultural  products  in  the  State  of  California  and  have  substituted  the  merchan- 
dizing of  agricultural  products.  That  means  centralized  control  of  these  crops 
so  that  they  move  to  such  markets  of  the  world,  and  at  such  t^'mes,  as  the  markets 
can  absorb  the  crops  at  a  fair  price. 

What  Merchandizing  Means 

I  am  going  to  explain  the  merchandizing  of  agricultural  products  in  detail, 
60  that  you  will  see  how  thoroughly  different  it  is  from  the  dumping  of  agricultural 
products.  Ths  merchandizing  of  crops  means  that  you  have  to  get  people  to  take 
the  whole  crop,  to  eat  all  of  it.  If  we  were  talking  about  the  merchandizing  of 
Ontario  apples,  of  which,  I  have  heard  it  said  that  sometimes  one-third  of  the  crop 
rots  on  the  trees— and  that  doesn't  help  either  the  grower  or  the  consumer — we 
would  say  that  the  whole  of  that  crop  had  to  be  moved  to  the  market.  The  first 
point  to  consider  is,  can  that  crop  be  moved  to  market  if  the  quality  is  not  right? 
The  first  point  in  merchandizing  is  to  create  crop  inspection  that  will  improve  the 
quality  of  the  crop.  You  have  to  start  away  back  to  make  sure  you  have  the  proper 
quality.     Even  in  things  like  chickens  we  have  associations  in  California. 

A  Lesson  in  Handling  the  Egg  Trade 

There  is  the  Poultry  Producers'  Association  of  Central  California,  which  han- 
dles twenty  million  dozen  of  eggs  on  a  purely  co-operative  basis,  and  we  grade  every 
one  of  these  eggs.  In  fact  we  decided  we  would  start  before  the  egg  was  laid.  We 
had  to  discourage  the  men  who  were  egg  sellers  from  hatching  their  own  eggs, 
and  now  we  have  a  great  majority  of  the  men  in  that  association  buying  day  old 
chicks.  The  hatching  is  done  by  experts  in  that  line.  The  farmers  buy  these 
day  old  chicks  and  we  can  guarantee  all  our  eggs  as  infertile  eggs  and  fit  for  stor- 
age purposes.  They  get  men  to  put  in  a  high  type  of  flocks.  There  is  a  man  who 
is  a  specialist  in  judging  flocks  by  appearance,  and  if  you  are  wise  you  run  your 
flock  before  him  and  he  will  tell  you  which  chicks  you  should  cull,  which  will  be 


good  layers,  and  which  are  not.  If  you  have  him  inspect  your  flocks  you  will  have 
an  average  of  twelve  dozen  eggs  from  each  hen  instead  of  ten.  We  standardize. 
We  have  almost  wholly  White  Leghorns,  which  are  the  best  layers  we  have  in  Cali- 
fomda,  so  that  our  eggs  are  of  the  same  general  type  of  pure  white  eggs.  We 
standardize,  and  constantly  keep  raising  the  quality  of  our  products.  That  is  why 
we  send  our  eggs  to  New  York.  They  have  to  travel  eighteen  days  to  get  there, 
and  yet  we  get  a  premium  for  those  eggs  over  eggs  raised  in  Long  Island  of  almost 
three  cents  a  dozen,  because  they  are  the  best  graded  eggs  by  carload  lots  in  New 
York  city.  They  know  that  every  egg  is  the  kind  of  egg  named,  Pentaluma  Extra, 
infertile,  and  we  stand  behind  that  guarantee.  The  first  step  in  merchandizing 
is  to  make  your  grading  quality  perfect.  That  is  why  I  have  been  so  proud  of 
the  courage  and  foresight  of  Manning  Doherty  in  insisting  that  the  Government 
see  that  the  dairy  products  be  standardized  as  high  as  can  be  and  tliat  the  greatest 
care  shall  be  taken  in  merchandizing  agricultural  products. 

The  Package  is  a  Most  Important  Factor 

The  next  thing  is  packaging — to  get  a  package  that  looks  good,  that  will  help 
to  sell  the  product,  that  will  stand  travel  and  suit  the  commodity  and  the  house- 
wife. Some  of  our  crops  are  put  in  packages  in  which  we  sell  by  the  dozen  in- 
stead of  the  twenty-five  pound  boxes  we  have  been  pushing  the  two  pound  package, 
stead  of  the  twenty-five  pound  boxes  we  have  been  pushing  the  two  pound  package 
which  is  a  size  the  housewife  likes,  and  keeps  the  prunes  absolutely  clean  and  right. 
We  spend  a  great  deal  of  time  in  preparing  the  right  sort  of  packages.  We  ex- 
periment to  see  how  one  and  two  pound  packages  will  look  in  the  store,  to  see  how 
they  will  keep,  and  if  they  will  keep  as  long  as  the  twenty  or  forty  or  sixtv 
pound  package. 

The  third  thing  is  that  we  try  to  extend  our  markets .  We  extend  markets  in 
two  ways,  first  by  extending  the  time  of  marketing,  and  secondly  by  extending  the 
place  of  marketing.  Let  us  take  eggs,  for  instance.  In  the  latter  part  of  Feb- 
ruary, March,  April,  and  the  first  half  of  May  the  eggs  would  be  dumped  on  the 
San  Francisco  market  and  break  thelm  down  to  ten  or  eleven  or  twelve  cents  a 
dozen,  and  some  of  the  wise  men  would  buy  them  and  put  them  in  cold  storage  and 
market  them  later  in  October  or  December  at  an  advance  of  about  thirty  cents  a 
dozen;  and  the  cost  of  holding  them,  including  insurance,  storage  and  everything 
ebe,  would  be  less  than  four  cents  a  dozen.  Of  course  that  simply  meant  that  we 
were  dumping  our  eggs  as  soon  as  they  were  produced,  although  we  knew  there 
would  be  a  famine  period  every  fall.  Now  our  producers'  association  stores  its 
eggs,  stores  between  two  and  four  million  dozen,  and  then  we  re-sell  in  the  fall  so 
that  we  have  an  extended  period  of  marketing  .spring  eggs  from  three  to  nine 
months.  We  have  extended  our  markets  by  extending  the  time  of  marketing, 
We  not  only  keep  them  off  the  San  Francisco  market  in  the  first  place  so  that  we 
don't  break  the  price  of  eggs,  but  we  put  them  into  cold  storage  and  distribute  to 
the  growers  at  a  good  storage  profit  in  the  fall  and  winter.  That  is  what  I  mean 
by  "extending  our  markets  by  extending  the  time  of  marketing." 

How  the  Market  Place  is  Extended 

Then  we  extend  our  markets  by  extending  the  place  of  marketing.  We  send 
men  all  over  the  world  to  find  out  where  we  can  sell  our  products.  We  had  a  man 
go  to  Japan  to  figure  on  how  to  sell  prunes  and  raisins  there.  We  send  a  man 
anywhere  in  the  world.  The  Prune  Growers'  Association  maintains  an  agent  right 
here  in  Toronto  who  has  an  office  for  Canada,  and  every  month  we  know  the  ab- 


10 

sorbing  power  of  Canada  for  prunes.  If  a  district  isn't  eating  enough  prunes 
we  go  in  and  find  out  why.  For  example,  Toronto  is  not  eating  enough,  for  yes- 
terday there  was  an  advertisement  for  Sunsweet  prunes.  That  is  because  you  are 
not  eating  enough  prunes  and  we  want  you  to  eat  more. 

We  study  the  situation  all  over  the  world.  Ju5t  take  the  little  group  of  farm- 
ers up  in  Oregon,  in  Tillemuth  county.  They  produce  cheese  which  they  claim  is 
better  than  the  cheese  you  produce  in  Ontario.  We  produce  cheese  in  California. 
We  used  to  blow  about  that  because  we  thought  our  herds  were  the  best  in  the 
world,  and  we  thought  our  cheese  must  be  the  best  in  the  world.  But  these  Tille- 
muth men,  better  organized  in  cheese  than  we  are  in  California,  are  selling  Tille- 
muth cheese  right  under  our  noses  in  San  Francisco  and  California  and  getting 
two  cents  a  pound  more  for  their  cheese  than  we  get  for  California  cheese  in 
our  own  state.  They  have  specialized  in  the  marketing  of  cheese,  and  are  beating 
us  in  our  own  markets  for  a  certain  grade  of  cheese.  They  are  so  proud  of  their 
cheese  that  they  have  the  name  "Tillemuth"  on  every  inch  of  rind  around  the 
cheese  and  they  sustain  the  quality  of  that  cheese  so  that  it  has  a  market  right 
in  the  State  of  California. 

Selling  Cheese  in  California 

You  would  think  that  the  last  place  a  co-operative  group  would  want  to  sell 
cheese  would  be  in  California,  but  they  get  away  with  it.  They  are  doing  ex- 
actly what  I  said  about  extending  markets  by  finding  places  to  market.  They  will 
come  to  Ontario  and  sell  cheese,  because  they  know  that  no  one  can  beat  them  in 
quality,  just  as  you  here  in  Ontario,  who  boast  of  the  quality  of  your  cheese,  sell 
it  in  London  and  let  the  Danes  take  the  cream  of  the  market  away  from  you  be- 
cause you  don't  absolutely  grade  and  keep  up  the  quality  of  your  cheese.  You 
should  put  the  maple  leaf  brand  on  every  inch  of  your  cheese  so  that  the  man  who 
eats  it  would  know  it  is  Canadian  cheese.  You  would  then  start  to  take  a  pride 
in  it,  and  will  keep  up  the  quality  of  everything  you  produce  when  you  put  your 
brand  on  it  and  send  it  into  the  markets  of  the  world. 

You  have  to  go  all  over  the  world  and  find  these  markets.  If  you  find  the 
Danes  and  the  Irish  can  beat  you  in  the  markets  of  England  you  have  to  get  some 
other  country  to  eat  as  much  cheese  as  they  do.  Show  the  French  that  if  they 
ate  more  cheese  they  would  be  better  off,  and  show  the  Germans  that  if  they  had 
more  of  the  right  kind  of  cheese,  instead  of  Limburger,  they  might  not  have  been 
60  warlike.  You  have  to  do  what  the  good  merchant  does.  You  have  to  study 
the  whole  world  and  see  if  you  can  find  markets  or  create  markets  to  absorb  your 
products.     That  is  the  third  great  step  in  merchandizing. 

There  Must  be  Centralized  Control 

The  fourth  great  step  is  to  bring  your  products  under  centralized  control. 
In  this  Province  you  raise  $100,00'0,00'0  of  dairy  products,  you  produce  fifteen 
to  twenty  million  pounds  of  cheese  and  quite  an  amount  of  butter.  Your  cheese  is 
produced  in  a  lot  of  little  factories  eadh  one  of  which  sticks  up  its  nose  to  the  next 
one,  and  there  you  have  your  cheese  offered  on  the  market  by  all  kinds  of  small 
units  each  competing  against  the  other.  Of  course  you  cannot  control  the  flow  of 
cheese  in  that  regard,  because  each  locality  has  its  own  manager.  I  understand 
that  thirty  of  them  have  the  one  salesman,  but  generally  it  is  a  case  of  one  against 
the  other.  There  is  nobody  to  control  the  flow  of  that  product  to  the  market,  no 
one  to  determine  what  market  it  should  go  to,  and  no  one  even  thinking  that  there 
is  an  ultimate  market.     Thev  think  that  the  onlv  market  is  the  local  cheese  board, 


11 

or  the  cheese  exporter  in  Montreal,  when  the  markets  are  really  in  England  and 
all  over  the  world.  The  only  way  you  will  get  real  success  in  cheese  marketing  i5 
by  studying  the  ultimate  markets,  and  controlling  the  flow  so  that  your  cheese  will 
only  go  to  the  cheese  markets  of  the  world  at  times  when  those  markets  can  absorb 
it.    In  short,  you  will  apply  this  great  principle. 

Selling'Cheese  in  Ontario 

As  you  people  sell  cheeese  now  and  as  we  used  to  sell  it  in  California,  we  used 
to  let  the  price  be  determined  by  the  supply  at  the  point  of  production,  the  worst 
blunder  ever  made,  because  the  price  ought  to  be  determined  by  the  supply  at  the 
point  of  consumption.  As  long  as  the  growers  stand  for  that  system,  as  they  are 
doing  here  now,  they  and  not  the  public  get  the  worst  of  it,  or,  more  correctly, 
they  as  well  as  the  public  are  getting  the  worst  of  it  and  only  the  speculators  are 
getting  benefit  from  that  system. 

Let  me  illustrate  that  with  cheese :  in  April,  May  and  early  in  June  when  the 
cows  are  giving  the  most  milk  you  have  the  most  cheese  made.  In  1921  the  price 
of  cheese  collapsed  within  seven  days  from  twenty-one  cents  to  fourteen  cents,  and 
then  kept  around  fourteen  cents  until  the  rush  of  cheese  was  practically  over.  You 
had  an  enormous  quantity  of  cheese  at  that  time,  and  the  factories  threw  it  all  on  the 
cheese  market.  The  cheese  was  not  eaten  in  these  month.?.  It  was  stored  in 
Montreal,  or  shipped  to  England  and  stored  there.  That  cheese  was  eaten  in 
August  and  September  and  October,  even  in  Noveml)er :  it  was  eaten  in  months 
when  the  cows  produced  less  milk  and  the  cheese  factories  produced  less  cheese. 
Xow  the  public  in  England  paid  a  high  price  for  their  cheese.  They  paid  on  the 
basis  of  the  high  price  for  cheese  in  September  and  October  at  the  time  they  ate 
it.  It  had  left  the  grower's  hands  at  a  price  fixed  on  the  basis  of  supply  at  point 
of  production  and  whenever  that  happens  the  grower  lose'.  Suppose  the  grower 
liad  moved  on  the  markets  in  April,  May  or  June  only  about  one-fourth  of  that 
cheese  supply,  that  the  growers  had  an  association  po  that  they  could  store  the 
balance  of  the.  cheese  until  August  or  September,  that  on  the  supplies  they  put 
in  storage  they  borrowed  motfey  to  give  some  money  to  the  growers — because  they 
always  need  money,  for  few  of  them  have  surplus  funds  in  the  bank.  I  suppose 
they  do  borrow  this  money  and  carry  over  this  cheese  until  the  factories  are  pro- 
ducing a  smaller  quantity,  what  happens?  Instead  of  selling  three-fourths  of  the 
crop  at  a  low  price  they  would  have  sold  the  whole  crop  at  a  fair  to  high  price, 
so  that  they  would  have  made  a  profit  and  the  consumers  in  England  would  not 
have  paid  one  more  cent  for  that  chee-e  in  the  long  run.  It  would  have  made  a 
difference  to  two  or  three  hundred  men,  none  of  whom  are  assisting  in  the  develop- 
ment of  Canada  or  England,  and  it  would  have  made  a  difference  on  the  favorable 
side  to  a  few  thousands  of  growers  and  a  great  many  con.sumers,  all  of  whom  are 
contributing  to  the  prosperity  of  both  Canada  and  England. 

A  Summary  of  Wise  Salesmanship 

Do  not  forget  these  principles.  The  merchandizing  of  agricultural  products, 
to  summarize,  means  the  following: 

First:  Inspection  and  grading  to  improve  quality. 

Second:  Getting  the  right  and  proper  type  of  box. 

Third:  Extending  the  marketing  period,  first  as  to  time  and  next  by  extending 
the  markets  as  to  place  and  location ;  next  by  controlling  the  movement  of  the  crop 
and  controllig  that  by  considering  supply  at  the  point  of  consumption  instead 
of  at  the  point  of  production. 


12 

We  have  discovered  that  these  things  will  work  in  California,  and  they  will 
work  with  any  type  of  product  grown,  perishable,  semi-perishable  and  non-perish- 
able. With  perishable  products  the  primary  problem  is  routing  so  that  no  market 
gets  a  glut  and  no  market  a  famine.  With  the  semi-perishable  and  non-perishable 
products  the  problem  is  storage  and  financing. 

There  has  been  a  technique  worked  out  to  take  care  of -any  kind  of  commodity 
that  is  grown.  I  will  not  detain  you  to  give  you  the  technique  of  building  ma- 
cliines  to  achieve  these  things,  but  I  do  say  that  if  you  will  only  get  the  view  that 
co-operative  marketing  is  intended  to  stop  dumping  and  substitute  merchandizing 
you  will  have  the  kernel  of  the  whole  California  movement. 

That  is  why  we  say  that  for  growers  to  band  together  simply  to  save  a  little 
by  co-operative  purchasing  and  things  of  that  kind  does  not  amount  to  enough. 
That  does  not  help  them  to  merchandize  their  crops,  and  if  the  growers  will  help 
each  other  to  merchandize  their  crops  they  can  make  enough  out  of  that  process 
so  that  they  can  pay  the  same  as  anybody  else  for  what  they  want  to  buy,  in  city 
or  town.  They  Avill  not  have  to  think  of  that  type  of  saving  except  in  the  same 
way  that  the  city  man  thinks  of  it.  The  growers  have  one  aim  to  accomplish, 
and  that  is  to  merchandize  their  crops  instead  of  dumping  their  crops. 

It  has  succeeded  in  California,  and  to-day  the  cotton  men  are  imitating  it.  the 
tobacco  men  are  imitating  it,  the  grain  men  are  imitating  it.  All  over  the  United 
States  this  movement  is  spreading  like  a  prairie  fire.  AVhat  does  that  mean  to  the 
grower?  What  does  it  mean  to  the  community,  to  the  coiisuming  public  and  to 
industry  as  a  whole? 

California  Growers  Now  Look  Prosperous 

First,  for  the  growers  it  has  meant  a  complete  change  in  their  whole  method 
of  living.  The  California  growers  look  different  to  the  growers  in  any  other  part 
of  the  United  States.  They  don't  have  worry  written  all  over  their  faces.  They 
are  not  hopeless  any  more.  They  have  had  steady  incomes  for  a  few  years,  and  art 
beginning  to  think  of  life  in  the  same  terms  that  other  men  think  of  life.  They 
are  beginning  to  think  of  physical  comforts  in  living,  of  decent  schools  and 
churches,  and  so  on.  That  is  why,  if  you  look  through  the  California  rural  dis- 
tricts to-day  you  will  see  homes  that  are  homes — homes  with  running  water  and 
bathrooms  and  everything  homes  should  have,  even  electricity.  We  find  they 
can  pay  enough  taxes  to  get  good  roads  and  California  roads  are  supjDosed  to  be 
the  best  in  the  United  States.  They  can  pay  enough  taxes  so  that  the  California 
rural  schools  are  the  best  rural  schools  in  the  United  States,  although  our  city 
schools  are  known  to  be  notoriously  poor.  They  can  pay  enough  taxes  so  that  they 
can  have  real  rural  libraries,  and  in  centres  not  big  enough  to  have  libraries  they 
pay  enough  taxes  so  that  they  can  have  travelling  libraries.  You  cannot  go  any- 
where in  the  co-operative  districts  without  seeing  good  churches,  little  movie  houses 
and  all  the  things  that  indicate  good  clean  recreation  as  well  as  good  comfortable 
living;  and  if  you  look  on  the  roster  of  the  University  of  Califorina  you  will  find 
that  it  is  the  largest  in  the  United  States — I  am  not  saying  it  is  the  best,  but  the 
largest — and  you  will  find  they  have  more  farmer  boys  and  girls  on  their  rolls  than 
in  any  other  two  States  in  the  United  States. 

The  Boys  and  Girls  also  Get  the  Benefits 

Our  farmers  send  their  boys  and  girls  to  the  high  school  and,  where  they  can, 
to  the  university.  They  have  learned  how  to  make  money,  and  with  this  money 
they  have  bought  enlightening  education  and  decent  living.     They  buy  life  in?ur- 


13 

ance  at  the  rate  of  five  to  one  over  the  best  Southern  states,  and  three  to  one  over 
the  best  of  other  agricultural  states.  The  California  farmer  looks  on  living  from 
the  same  viewpoint  that  you  or  I  look  upon  life.  The  California  farmer  does  not 
need  to  make  his  boys  and  girls  work  on  the  farm  between  school  hours.  He  does 
not  send  his  wife  to  work  on  the  farm,  as  is  done  in  so  many  States  in  the  South. 
The  California  farmers  live  on  tlie  same  standard  of  living  that  you  and  I  think 
is  right  for  a  city  man  with  a  small  factory  at  this  particular  stage  of  civilization. 
The  finest  citizenship  in  California  is  on  the  California  farm.  The  finest  type  of 
men  and  women  is  on  the  California  farm,  and  it  has  been  done  within  the  last 
fifteen  years.  It  has  all  happened  since  the  California  farmer  learned  to  be  in- 
dtpendent — learned  to  run  his  own  business  in  a  dignified,  sound  way.  To  the 
farmer  this  co-operative  movement  has  meant  his  first  chance  at  life,  his  first  chance 
ai  comfortable,  sane  living,  his  first  chance  at  giving  his  family  an  opportunity  for 
a  higher  type  of  living  that  you  and  I,  in  our  better  moments,  think  is  due  every 
nian  and  woman  today.  To  the  California  farmer  this  has  become  a  gospel,  and 
that  is  why  these  associations,  which  started  out  with  a  control  of  fifty  per  cent. 
of  some  particular  commodity,  now,  with  the  strawberries  and  things  like  that, 
have  ninety  per  cent,  of  the  entire  crop  sold  through  one  office ;  the  raisin  growers 
have  95  per  cent,  of  the  growers  in  one  association,  the  prune  growers  have  88 
pej*  cent,  of  the  growers  in  one  association,  the  almond  growers  have  almost  90 
per  cent,  in  one  association;  because  our  farmers  have  seen  through  co-opera- 
tive marketing  they  achieve  everything  that  modern  civilization  holds.  It  is  the 
one  great  movement  to  them,  the  one  thing  that  has  really  worked  and  is  working 
now  in  a  sound,  permanent  way. 

What  it  Means  to  the  Community 

What  has  that  meant  to  the  community  ?  First  these  farmers  have  got  more 
money  than  ever  before.  I  have  in  mind  a  district  that  in  1912  had  a  net  return 
from  raisins  of  less  than  $1,000,000'  annually.  That  meant  that  the  growers  liad 
a  spending  power  of  lass  than  $1,000,000  a  year  from  that  industry.  Up  to  1918 
— and  that  was  before  the  prohibition  movement  which  changed  the  raisin  in- 
dustry in  some  regard — they  had  increased  the  return  from  raisins  in  that  district 
alone  to  $23,000,000  a  year.  They  had  more  than  trebled  the  crop  and  were  sell- 
ing every  pound  of  raisins  they  produced.  They  had  increased  the  purchasing 
power  of  those  farmers  to  about  $23,000,000  a  year.  What  did  that  mean?  It 
meant  that  the  farmers  stopped  buying  their  wives  "mother  hubbards"  and  let 
them  buy  decent  dresses.  They  stopped  buying  overalls  and  started  buying  decent 
suits  of  clothes,  decent  shoes  and  all  things  which  mean  an  easier  way  of  living. 
iThey  had  better  food,  and  they  built  better  homes.  In  short,  they  spent  that  in- 
come right  around  in  the  town.  The  merchants  who  sold  them  the  things  made 
deposits  in  the  banks  or  made  investments.  This  and  other  towns  began  to  thrive, 
and  that  is  why  in  1918,  going  to  Fresno  and  those  little  towns  around  there,  we 
are  among  the  most  prosperous  cities  in  the  world  for  their  size.  If  you  go  to 
Fresno  you  will  wonder  from  where  this  prosperity  comes.  It  is  the  centre  of 
three  great  co-operative  organizations,  the  raisin,  the  peach,  and  the  fig  growers, 
and  tops  all  cities  in  Babson's  list  of  prosperous  small  cities  of  the  world.  All 
that  out  of  agriculture  and  not  out  of  manufacturing.  That  same  story  can  be 
told  of  other  little  towns  that  are  centres  of  the  co-operative  movement.  The.^e 
towns  are  away  above  the  small  farming  towns  of  the  north-east  in  average  pros- 
perity and  wealth.  "VMiat  did  it?  The  growers  did  it  and  the  communities  helped, 
because  in  our  California  communities,  the  financiers,  the  merchnnts,  the  lawyers, 


14 

the  travellers,  all  recognized  that  if  agriculture  is  not  prosperous  the  community 
does  not  prosper,  and  these  men  came  out  and  helped  the  growers  form  these  as- 
sociations. The  first  money  ever  gathered  together  to  help  California  growers 
organize  was  $26,000  donated  hy  Santa  Anna  merchants.  When  the  raisin  grow- 
ers organized,  $30i0',000  in  cash  was  got  from  the  merchants  of  Fresno  and  sur- 
rounding cities.  The  men  in  business  h^ave  realized  that  the  life  of  the  community 
is  the  life  of  surrounding  agriculture,  and  they  go  out  in  their  waggons  and 
machines  to  help  the  growers  get  signatures  to  contracts  for  these  associations. 
What  it  Means  to  the  Consuming  Public 
What  does  it  mean  to  the  consuming  public?  I  know  that  a  great  many 
thinkers  believe  that  if  the  grower  gets  more,  the  consuming  public  must  pay  more. 
There  are  two  sides  to  that.  Even  if  it  did  mean  that  the  consumer  had  to  pay 
more  money,  still  the  movement  would  be  justified.  J^o  consumer  has  a  right  to 
say  that  he  should  have  cheap  goods  if  the  price  he  gives  means  that  he  is  keep- 
ing his  heel  on  the  neck  of  his  brother.  No  consumer  has  the  right  to  ask  any 
•grower  to  produce  cotton,  for  instance,  if  the  price  that  grower  gets  for  his  pro- 
duct is  keeping  him  in  something  absolutely  as  bad  as  the  old-time  slavery.  But 
it  does  not  work  that  way.  We  do  not  ask  for  more  money  from  the  consumer  in 
the  long  run.  Take  the  case  of  oranges.  You  are  getting  better  oranges  to-day 
than  you  dreamed  of  when  the  association  Avas  started.  You  get  good  graded 
oranges  every  day  in  the  year.  Where  they  used  to  have  a  three  months  shipping 
season;  now  by  scientific  planning  they  ship  oranges  every  day  in  the  year.  They 
have  extended  the  shipping  period  from  three  months  to  twelve  months,  and 
those  oranges  are  actually  costing  you  less  to-day  by  twelve  per  cent,  than  they 
used  to  cost  you  before  the  orange  growers  were  organized.  And  the  ornnge 
growers  are  making  more  money.  Why?  Because  they  are  selling  all  the  orangea 
they  raise.  In  the  old  days  they  sold  perhaps  one-third  of  their  crop,  and  the  other 
two-thirds  rotted  as  your  apples  rot  here  in  Ontario.  If  you  could  move  all  your 
apples  to  market  you  could  afl'ord  to  take  a  pretty  fair  price  for  those  apples, 
and  make  your  profit  depend  on  volume  and  not  on  the  margin.  The  speculator 
depends  on  the  margin,  the  merchandizer  depends  on  buying,  on  the  volume. 
What  Cabbage  Co=ordination  Did 

The  people  of  N"ew  Yor"k  Avere  paying  for  cabbages  twenty  to  twenty-five 
cents  for  these  cannon-ball  cabbages.  In  the  Eio  Grande  field  in  Texas  they  were 
offering  the  growers  $8  a  ton  for  those  same  cabbages,  a  price,  it  was  felt,  that 
would  not  even  pay  the  freight  to  take  those  cabbages  to  ISTew  York  Avhere  the 
people  wanted  cabbages.  If  those  growers  organized  and,  co-ordinating  their  ef- 
forts with  those  of  the  growers  of  California,  could  have  got  together,  they  would 
not  have  needed  to  sell  to  the  buyers  down  in  the  Rio  district  or  in  California, 
but  would  have  managed  to  get  them  to  the  market  in  New  York;  and  if  they 
could  have  delivered  those  cabbages  in  'New  York  they  could  have  sold  them  for 
seven  cents  each,  paid  the  freight,  and  paid  the  cost  of  production  and  could  have 
made  more  than  $10  a  ton  for  those  cabbages. 

As  it  is  in  practice,  the  whole  crop  of  cabbages  rotted  in  the  Rio  Grande,  and 
in  the  fields  of  California  which  are  not  organized,  because  most  of  these  cabbages 
are  controlled  by  Japs — efficient  farmers,  only  we  wish  they  would  farm  some- 
where else. 

With  perishable  products  the  consumer  suffers,  and  even  the  grain  grower, 
by  having  non-co-operative  marketing.  If  you  will  only  study  what  happens  in 
this  country  and  how  much  of  the  crop  stays  in  the  growers  hands,  you  will 


15 

realize  that  the  consumer  is  the  great  sufferer  for  the  lack  of  organization  among 
the  growers;  and  with  non-perishable  products  I  wonder  if  you  think  it  makes 
so  much  difference  to  the  consumer  if  the  grower  gets  his  share?  Wheat  was 
dumped  by  your  Canadian  farmers  when  wheat  was  at  one  dollar  a  biLshel,  yet 
at  that  time  every  student  of  grain  knew  that  according  to  the  statistics  grain 
had  to  come  up.  Your  people  had  to  dump  their  wheat,  they  could  not  hold  it. 
They  were  not  organized  to  put  it  into  elevators.  They  were  not  accustomed  to 
doing  that  sort  of  thing  because  they  were  not  organized  for  co-operative  market- 
ing.' But  in  Washington,  as  in  Idaho  and  Montana,  there  is  a  little  wheat  growers' 
association.  They  sold  a  little  wheat  and  then  they  decided  that  the  market  was 
not  normal,  so  they  put  the  wheat  they  had  into  elevators  and  warehouses,  and 
they  finally  sold  it  at  a  price  ranging  from  $1.40  to  $1.60  a  bushel  in  average 
return  for  the  growers  in  the  State  of  Washington. 

Who  Gets  Most  of  the  Wheat  Profits? 

On  the  Marquis  wheat  their  average  return  will  be  more  than  $1.40  a  bushel, 
where  the  average  return  on  Marquis  wheat  in  Canadian  districts — wheat  which 
you  Canadians  originated  for  us,  wheat  just  as  good  if  not  better  than  theirs,  and 
grown  with  just  as  much  skill — averages  less  than  $1.10  a  bushel.  Your  farmers 
lost  30  cents  a  bushel  on  more  than  250,000,000  bushels  of  wheat.  Your  farmers 
lost  it,  but  do  you  think  you  a^  consumers  are  paying  less  for  the  bread  you  eat 
on  that  account  ?  Do  you  think  you  get  the  benefit  of  it  ?  That  wheat  was  stored, 
and  one  firm  in  Chicago  is  today  long  more  than  40,000,000  bushels.  That  firm 
is  making  a  clean-up  this  year.  You  are  not  making  that  benefit.  That  firm 
knew  something  about  statistics,  and  were  willing  to  take  a  chance  on  it.  They 
have  that  wheat  in  storehouses  today,  and  they  are  going  to  sell  it  at  perfectly 
good  prices.  Some  think  wheat  is  going  to  $1.90  or  $2  a  bushel,  and  they  are 
hol'ding  the  wheat,  and  you  and  I  are  going  to  pay  for  it  and  pay  the  price  they 
choose  to  sell  it  for  through  the  miller.  The  public  does  not  get  any  benefit  on 
that  particular  kind  of  transaction,  and  the  growers  lose  an  enormous  amount  of 
money.  And  because  the  grower  loses  that  amount  of  money  that  means  a  less- 
ened purchasing  power  by  the  grower.  Every  merchant  in  the  community  loses 
that  business.  That  merchant  buys  from  the  wholesaler  in  Toronto,  and  the 
wholesaler  also  loses  from  that  sort  of  proposition.  Wherever  you  have  specula- 
tion instead  of  merchandizing  the  public  loses  and  the  grower  loses,  and  some- 
where in  between  we  manufacture  a  few  more  millionaires  with  a,  limited  pur- 
chasing power  except  for  pearl  necklaces  and  the  sort  of  things  you  read  about. 

True  Co-operation  Does  Not  Stick  the  Consumer 

The  gi'e&t  aim  of  co-operativ?  marketing  is  not  to  stick  the  consume-.  The 
great  aim  is  to  merchandize  that  product  so  that  the  consumer's  dollar  can  stay 
where  it  formerly  did  but  so  that  the  grower  can  get  his  share  out  of  that  con- 
sumer's dollar.  In  California,  in  dried  fruit?,  we  used  to  get  eight  cents  out  of 
the  consumer's  dollar,  but  now  the  California  co-operatives  get  forty-eight  cents 
of  the  consumer's  dollar  without  increasing  the  dollar.  In  dairy  products  we  have 
gone  up  a  little  more  than  14  per  cent,  in  the  share  of  the  grower  out  of  the  con- 
sumer's dollar.  Our  aim  isn't  to  stick  anybody.  It  is  to  introduce  a  system  which 
prevents  waste,  to  introduce  a  system  which  prevents  speculation  and  to  introduce 
a  system  which  means  that  the  man  who  produced  farm  products  shall  have  a 
chance  to  merchandize  that  product  and  make  a  real  living,  a  civilized  living,  out 


](J 

of  that  product,  so  that  from  the  standpoint  of  the  grower,  the  st9,ndpoint  of 
the  community  and  the  standpoint  of  the  consuming  public  this  co-operative 
(marketing  movement   has  more  than  justified   itself. 

Co=operation  Develops  Better  Citizenship 

And  then  there  is  another  phase  that  we  have  to  think  about.  Do  you  think 
you  are  producing  good  citizens  out  of  men  who  feel  that  everything  they  do  is 
manipulated,  and  that  they  are  losing  out  of  it.  Do  you  think  you  are  producing 
good  citizens  when  you  make  a  man  feel  there  is  no  fair  industrial  basis  for  their 
living?  From  the  standpoint  of  citizenship  this  co-operative  movement  has  been 
the  most  valuable  thing  we  have  ever  had  in  California.  It  has  united  classes. 
It  has  not  .separated  the  classes  in  California  with  bitterness.  It  has  united  them 
in  the  State  of  California.  It  has  built  up  the  finest  type  of  citizenship  which 
the  State  has  ever  knowai.  And  it  has  gone  fuii:her  than  that.  It  has  entered 
into  the  life  of  every  man  who  participates  in  it.  He  comes  to  realize  that  the 
other  man  is  a  man  just  like  hiniself,  that  he  is  doing  something  with  the  other 
man.  They  have  recognized  that.  You  can  see  it  in  their  faces.  That  is  why 
we  have  these  wonderful  managers  in  the  co-operatives  constantly  being  offered 
doubled  salaries  if  they  would  leave  the  co-operatives.  They  never  think  of  leav- 
ing the  co-operatives  because  the  sense  of  service  has  got  into  their  blood.  They 
realize  they  are  doing  a  big  constructive  thing.  There  is  a  different  spirit  in  our 
farmers  since  co-operative  marketing  has  become  more  or  less  universal.  I  have 
seen  that  happen.  I  have  seen  men  who  couldn't  be  gotten  together  for  any  other 
purpose,  once  they  have  got  together  for  co-operative  marketing  they  will  ^  get  to- 
gether for  clubs  or  to  build  churches  or  schools  or  any  other  purpose  for  which 
men  can  properly  and  wisely  get  together.  There  is  a  spirit  that  grows  from  co- 
(operation  that  you  will  never  find  anywhere  else. 

Encourage  Co=operative  Selling  Because  it  is  the  Right  Thing 

I  want  your  interest  in  co-operative  marketing,  not  because  it  is  a  matter  of 
dollars  and  cents  in  the  pockets  of  the  grower  or  the  pockets  of  the  merchant  or 
the  community  at  large.  I  do  not  want  your  interest  in  co-operative  marketing 
on  that  account.  I  want  your  interest  because,  in  the  first  place  it  is  the  right 
thing,  and  because  it  is  the  one  great  permanent  moveiuent  by  which  a  new  and 
fuller  spirit  of  citizenship  ha?'  been  created  on  the  farms  of  the  United  States, 
on  the  farms  of  Denmark,  and  the  farms  of  every  country  in  the  world  in  which 
the  growers  have  learned  to  work  together  intelligently  on  their  primary  in- 
dustrial problem.  And,  men  and  women  of  Toronto,  I  hope  yoit  feel  with  me  that 
it  is  not  only  a  farm  problem.  It  is  a  problem  for  you  as  well  as  the  farmer,  and 
you  will  not  be  doing  your  full  duty  as  citizens  unless  you  give  moral  support 
and  more  than  moral  guidance  to  the  development  of  this  movement  in  Ontario. 
We  have  done  a  thing  in  California  which  you  can  do  in  Ontario,  and  since  you 
can  do  it,  I  know  yoti  are  going  to  see  that  it  is  done.    (Applause). 


ir 


ENDORSED  BY  THE  PRIME  MINISTER 


Co=operative   Marketing  is   Task    Urgently    Demanding    the    Best    Thought  of   the 

People  of  Ontario 


Hon.  E.  C.  Drury  :  I  did  not  come  here  to-night  to  talk  but  to  listen,  and 
1  have  been  abundantly  rewarded  for  my  coming  here  in  the  words  I  have  heard 
and  in  the  vision  that  has  been  given.  I  do  not  know  how  the  speaker  managed 
to  know  so  much  of  our  conditions  here  in  Ontario. 


^ 


**v. 


An  Interested  Student  of  Co=operative  Work 

As  the  chairman  said,  I  have  for  years  been  interested  in  thi^  matter  of  co- 
operation. I  have  been  interested  because  I  think  I  see  in  it  a  great  means  of  im- 
provement in  a  field  that  it  is  of  national  moment  should  be  improved.  I  think 
perhaps  our  agricultural  conditions  here  have  not  fallen  to  the  status  they  have  in 
certain  parts  of  the  Union.  I  think  that  perhaps  a  larger  proportion  of  our  land 
is  in  the  hands  of  owners  than  in  some  of  the  prosperous  American  States,  and 
I  tliink  perhaps  our  standards  of  living  have  heen  maintained  more  nearly  level 
with  other  classes  in  the  community.  But  while  that  is  true  there  is  still  a  tremen- 
dous work  to  be  done.     We  have  here  in  full  evidence  the  remarkable  flow  of 


18 

population  from  the  rural  districts  to  the  large  centres.  Just  think!  About 
one-sixth  of  the  whole  population  of  Ontario  is  within  five  miles  of  this  building 
to-night.  Our  best  agricultural  counties  are  losing  population,  not  because 
modern  machinery  is  displacing  men — that  never  had  been  true  in  this  country 
though  it  was  true  in  the  older  countries  where  agriculture  had  already  fully 
developed  before  the  introduction  of  machinery.  It  was  never  true  in  thi£  coun- 
try, because  agriculture  was  developing  and  is  still  developing  with  the  introduc- 
tion of  labor  saving  machinery.  We  have  places  on  the  farm  for  three  times  the 
agricultural  population  we  have  there. 

Co=operative  Effort  will  Keep  more  People  on  the  Land 

They  have  left  the  soil  because  of  economic  conditions.  I  remember  three  or  four 
years  ago  saying  at  a  luncheon  that  it  was  a  field  we  must  look  into,  and  1  remem- 
ber the  superficial  comment  that  was  made  on  that  statement  by  a  city  daily, 
that  it  was  useless  to  complain  of  the  population  leaving  the  farm,  that  the  man 
who  used  to  swing  the  cradle  was  now  in  the  factories  making  binders. 

If  this  Province  is  to  go  aliead  in  the  production  of  wealth  we  must  have 
more  jieoplc  on  the  farms,  more  intelligence  on  the  farms,  more  production  on 
the  farms  and  more  pro.sperity  on  the  farms.  You  cannot  get  it  in  any  otlier 
way.  After  all,  the  members  of  our  community,  our  Canadian  community,  who 
go  out  into  the  world  and  earn  the  family  income  are  in  our  basic  industries — 
agriculture,  mining,  lumbering  and  fishing.  The  rest  of  the  family  merely  wait 
in  a  domestic  way  on  those  four.  They  go  out  into  the  world  and  earn  the  family 
income  and  pay  their  brothers  and  sisters  for  the  little  housekeeping  chores  for 
the  main  members  of  the  family.  And  the  biggest  of  these  brothers  is  agricul- 
ture, and  agriculture  must  continue  to  be  the  great  earner  of  the  national  income 
for  years  and  years  to  come ;  so  that  our  national  growth,  our  national  prosperity 
and  our  national  well-being  will  depend  on  the  prosperity  of  that  great  basic  in- 
dustry, agriculture. 

That  is  a  pleasant  vision  our  friend  has  given  us  of  a  prosperous  country- 
side of  the  finest  kind  of  homes  with  a  land  that  is  tilled  because  it  pays  to  till 
it,  of  men  who  are  prosperous  and  can  do  good  business  by  working  together,  a 
country  of  churches  and  schools  and  wholesome  amusements.  It  is  a  most  en- 
trancing vision.  And  it  means  another  thing  of  great  importance,  and  that  is 
keeping  the  right  kind  of  people  on  the  chief  material  asset  any  country  can  have, 
and  that  is  agricultural  land. 

The  Farm  Character  Tinges^The^Nation 

It  is  a  very  common  saying,  and  I  think  it  is  true  that  the  quality  and 
pharaeter  of  a  nation's  population  is  found  on  the  farms.  It  is  a  thing  that  is 
well  accepted  that  no  population  centred  in  great  cities  can  maintain  itself.  It 
is  also  a  fact,  and  cannot  be  questioned,  that  the  welfare  and  the  very  life  of  our 
people  depends  on  the  producing  land,  depends  on  the  quality  and  quantity  of 
the  food  that  can  be  produced  and  the  quality  and  quantity  of  other  things  that 
can  be  produced  on  the  land.  That  being  the  case  two  things  are  important.  In 
the  first  place  we  must  keep  the  best  of  the  people  on  the  land,  fit  for  the  task  of 
maintaining  the  standard  of  national  population  and  in  the  second  place  we  must 
keep  the  right  sort  of  people  on  the  land  in  order  that  they  may  keep  the  land  in 
.condition  to  serve  the  generations  to  come.  You  dare  not  allow  the  land  to  get 
into  the  hands  of  people  of  low  intelligence,  of  low  standards  of  living,  and  in 
order  to  do  that  you  have  to  maintain  rural  prosperity. 

It  is  the  problem  not  of  the  farmer  only  or  of  the  man  in  the  small  town, 
it  is  the  problem  of  the  nation.     I  like  that  vision  given  us,  and  if  it  can  be 


19 

applied  in  California,  which,  as  Mr.  Sapiro  has  told  us  is  three  thousand  miles 
from  its  markets,  what  can  not  be  done  in  Ontario,  because  Ontario  is  in  absolute- 
ly the  finest  position  in  America  from  the  producers'  standpoint,  the  nearest  to 
markets  in  all  directions.  It  is  the  most  southerly  point  of  Canada  convenient 
to  European  markets,  with  water  transport,  and  it  is  also  thrust  like  a  wedge  into 
the  chief  consuming  centre  of  the  United  States.  If  these  things  can  be  done  in 
iCalifornia  what  can  we  not  do  in  Ontario?  We  have  been  trying  to  do  a  little 
along  this  line  for  years,  but  I  think  we  have  only  been  playing.  1  think  perhaps 
we  have  not  got  down  to  the  basic  principles  underlying  it — 'got  down,  as  the 
Scotch  Presbyterian  would  say)  to  the  root  of  the  matter. 

The  Movement  Deserves  Support 
It  ought  to  he  our  task,  having  in  view  the   large   issues  I   pointed   out  of 

national  interest  in  farm  prosperity,  better  farm  homes,  better  farm  people,  bet- 
ter tilled  land  and  living  attractive  enough  to  hold  the  people  on  the  land — it 
ought  to  be  the  task  of  every  class  in  the  community  to  build  up  a  movement 
which  means  ao  much  to  agricultural  prosperity.  Mr.  Sapiro  has  pointed  out 
very  clearly  that  it  does  not  mean  higher  prices  to  the  consumer.  I  think  the 
iCalifornia  producers  have  adopted  a  good  plan.  They  make  the  people  eat  their 
Jproducts.  It  is  a  strange  thing  that  in  a  country  producing  some  of  the  best 
cheese  in  the  world  the  cheese  eating  habit  should  be  almost  absent.  We  send 
that  excellent  food  to  other  quarters  of  the  world.  We  may  have  to  take  that 
sort  of  method,  but  whatever  we  do  it  will  be  abundantly  worth  while.  I  do  not 
mean  to  the  speculators,  because  I  do  not  care  what  becomes  of  them,  the  sort 
of  man  who  merely  sits  as  the  miller  I  once  knew  did.  He  had,  in  a  certain 
spout  in  the  mill  through  which  the  grain  ran,  a  little  hole  and  out  of  that  little 
hole  ran  a  little  pile  of  grain  that  did  not  go  into  the  bag  of  the  man  who  brought 
the  grain  to  the  mill.  We  have,  unfortunately,  certain  people  who  are  not  useful 
to  the  community  who  are  merely  the  hole  in  the  spout.  The  product  on  the 
way  from  the  producer  to  the  consumer  leaks  out  and  forms  a  nice  little  pile  of 
easily  obtained  but  not  earned  wealth.  Now,  if  this  programme  hurts  that  class 
of  people  I  am  not  going  to  cry,  and  no  one  should  cry  because  no  one  in  the  com- 
munity should  be  interested  in  protecting  the  profits  of  anyone  who  does  not  earn 
them.  If  we  can  see  that  the  profits  and  rewards  go  to  those  who  earn  them  we 
will  be  doing  well,  and  if  a  few  dozen  people  find  their  incomes  injured,  we  won't 
worry. 

Co=operation  is  an  Enemy  of  Waste 

The  great  thing  is  this;  that  by  means  of  this  method  wa^te  is  cut  out  and 
increased  production  is  followed  by  lower  prices  to  the  consumer,  because  the  pres- 
ent method  which  discourages  production,  ultimately  increases  the  price  to  the 
consumer.  By  means  of  methods  of  that  sort  in  California  they  have  been  al)le 
to  put  the  producer  on  a  new  basis,  a  prosperous,  seH-respecting,  contented  basis 
and  in  doing  that  they  have  been  able  to  produce  what  is  really  a  wonderfully 
jmvigorated  national  life. 

I  respect  and  admire  the  people  of  California  for  what  they  have  done.  They 
have  done  a  great  thing.  But  I  have  self  conceit  enough  in  our  people  in  the 
Province  of  Ontario  to  believe  that  what  they  have  done  done  in  California  we  can 
do  in  Ontario.  As  I  started  out  to  say,  this  is  a  task  to  which  we  must  set  our- 
selves, and  we  must  not  be  content  until  we  have  carried  through  a  movement 
that  means  so  much  not  only  to  the  farming  class  but  to  the  good  of  the  whole 
nation.    ( Applause) . 


MARKETING    IS  BIG  PROBLEM  OF  ONTARIO    FARMERS 


Minister  of  Agriculture  Shows  the  Need  and  Points  Way  to  Effective  Organization 


Speaking  at  Ridgetowii,  Hon.  Manning  Doherty  said : 

I  am  particularly  pleased,  on  this  occasion,  on  account  of  the  fact  that  I  have 
been  able  to  bring  with  me  to  address  you,  Mr.  Sapiro,  of  San  Francisco,  Cali- 
fornia. For  many  years  I  have  followed  with  interest  the  work  which  was  being 
done  in  the  United  States  by  Mr.  Sapiro.  I  have  admired  the  uniform  success 
which  has  attended  the  various  associations  which  he  has  been  largely  responsible 
for  bringing  into  existence.    Many  years  ago  I  made  the  statement,  and  have  re- 


HON.  MANNING  DOHERTY. 

peatcd  it  time  after  time  .since,  and  I  more  than  ever  now  believe  it  to  be  true, 
that  the  salvation  of  agriculture  on  the  continent  of  America  was  to  come  through 
the  development  of  safe,  sane,  proper,  co-operative  marketing  associations  of  far- 
mers themselves. 

What  Farmers  Have  Done  for  Themselves 

Mr.  Sapiro  will  tell  you,  this  afternoon,  of  the  story  of  what  the  farmiers 
of  California  have  done  for  themselves,  and  his  .story  will  be  as  a  romance  to 
you,  and  I  want  you,  all  the  time  the  story  is  being  unfolded,  to  keep  this  in  mind 


20 


»1 

— the  words  are  not  dropping  from  the  lips  of  someone  who  has  read  of  the  theory 
of  the  development  of  agricultural  associations.  You  are  going  to  listen  to  some- 
one who  has  not  had  a  dream,  but  to  one  who  has  ax3tu)ally  done  these  things  time 
after  time,  and  by  realizing  this,  the  true  force  of  the  story  that  will  be  told 
will  be  brought  home  to  you.  And  'Mr.  Sapiro  will  tell  you  what  the  farmers  of 
California  have  done  we  can  do  in  this  Province  and  are  going  to  do,  in  the  next 
five  years. 

Now,  Canada  is  faced  with  very  many  serious  problems,  and  problems  that 
are  comparatively  new  to  us.  We  know,  as  a  result  of  the  war,  that  our  foreign 
obligations  have  been  vastly  increased.  Our  national  debt  is  between  two  and 
two  and  a  half  billion  dollars  and  for  our  small  population  that  isi  a  big  load,  but  it 
is  going  to  be  paid  and  discharged,  and  it  can  be  discharged  only  in  one  way,  ana 
that  is  by  increasing  our  production  and  increasing  our  exports  to  the  various 
markets  of  the  world.  The  foreign  indebtedness  can  be  discharged  in  no  other 
way,  practically,  than  by  exporting  products  of  the  country. 

Importance  of  Agricultural  Production 

Agricultural  products  form  a  very  large  percentage  of  our  exports.  Over 
sixty  per  cent,  of  Canada's  exports  come  from  the  soil.  That  being  the  case, 
it  behooves  us  to  see  to  it  that  our  exports  of  agricultural  products  are  increased 
and  increased  until  we  reach  the  point  where  we  can  discharge  our  obligations 
with  ease.  Increased  exports  mean  this: — that  we  have  got  to  retain  the  markets 
we  now  already  enjoy;  and  not  only  have  we  got  to  do  that,  but  we  have  got  to 
go  f-orward  and  get  new  markets  and  we  have  got  to  get  a  higher  percentage  of 
the  markets  into  which  we  noAv  already  ship.  We  have  to  extend  our  markets. 
What  does  that  mean?  We  can  extend  our  markets,  in  my  mind,  in 
only  one  way.  We  have  got  to  see  to  it  that  our  products  going  on  to  the  markets 
of  the  world  go  onto  those  markets  in  the  shape  and  form  demanded  by  the  market 
we  are  attempting  to  gain.  We  have  to  come  to  putting  into  practise  the  policy 
of  grading  our  farm  products  if  we  are  going  to  hold  our  position  in  the  world. 
We  are  being  crushed  out  of  the  market  today  by  countries  that  were  never  placed 
by  Providence  as  we  are  placed.  We  can  grow  the  finest  products  in  the  world. 
We  have  shoMTi  in  exhibitions  that  we  can,  and  yet  these  other  countries  crowd 
us  out  of  our  foreign  markets.  They  are  going  into  those  markets  with  their 
industry  organized.  They  are  going  in  there  in  a  sane  fashion.  They  are  going 
in  with  their  goods  standardized  as  to  grades  and  we  have  got  to  do  the  fame 
thing,  and  do  it  in  the  next  few  years,  if  we  are  going  to  hold  the  markets  we 
already  enjoy. 

Co=operative  Associations  an  Actual  Necessity 

How  are  we  to  do  that?  In  my  mind  there  is  only  one  effective,  economical 
way,  and  that  is  by  the  development  of  the  style  of  co-operative  associations  that 
I  spoke  to  you  about  a  few  minutes  ago.  I  know  you  are  not  directly  or  imme- 
diately interested  in  dairy  products  as  they  are  going  into  the  markets  of  Great 
Britain,  but  let  us  all  realize,  even  although  you  may  be  growing  tobacco  or  corn 
or  other  things  that  you  are  interested  in  it,  and  must  see  to  it  that  every  branch 
of  agriculture  is  prosperous  and  substantial.  We  have  enjoyed  the  markets  of 
Great  Britain  for  a  great  many  years  for  our  cheese  and  our  dairying  export 
products.  We  annually  produce  one  hundred  million  dollars  worth  of  dairy  pro- 
ducts. It  might  just  as  well  be  two  or  three  hundred  million,  because  we  can 
produce  them  and  we  can  produce  the  proper  quality.    We  have  been  shipping  our 


22 

cheese  into  the  markets  of  Great  Britain.  We  were  in  the  exporting  business  long 
before  any  other  country,  and  we  had  practically  a  monopoly  so  far  as  the  British 
cheese  market  was  concerned. 

New  Zealand  and  the  Cheese  Industry 

Then,  in  1916,  when  there  was  a  great  demand  for  cheese  and  the  price  was 
high,  NeAv  Zealand,  one  of  our  sister  dominions,  of  which  we  are  very  proud, 
which  had  for  years  been  largely  producing  butter,  started  to  make  cheese,  and 
she  started  to  ship  cheese,  of  course,  to  the  cheese  market  of  the  world,  which  is 
Great  Britain.  Since  1916,  when  she  made  her  first  cheese  for  export — and 
that  is  only  about  five  years  ago — since  that  time  she  has  increased  her  produc- 
tion, because  she  found  she  could  make  good  cheese  and  make  money  out  of  it,  and 
she  has  gone  on  and  developed  it,  and  she  has  increased  her  production  of  cheese 
in  that  time  by  four  hundred  per  cent.  She  is  shipping  it  right  into  the  market 
where  we  had  been  shipping  for  years  and  years.  South  Africa  saw  what  New 
Zealand  was  doing,  and  she  said :  ''We  can  make  cheese."  She  went  into  the 
production  of  cheese,  and  before  1917,  South  Africa  was  an  importing  country, 
but  since  that  time  she  has  become  quite  a  considerable  exporter,  particularly  of 
cheese,  to  Great  Britain.  Now,  in  New  Zealand,  the  marketing  of  agricultural 
products  is  highly  organized.  You  cannot  ship  a  pound  of  cheese  or  butter  or 
anything  out  of  New  Zealand  to  the  markets  of  the  world  unless  it  goes  through 
the  hands  of  the  Government  graders,  with  the  result  that  the  merchant  in  Lon- 
don when  he  orders  a  ton  of  No.  1  cheese  or  Extra  fine  cheese,  he  knows  exactly 
what  he  is  getting,  and  that  there  will  be  no  trouble  ahout  it.  It  is  the  same  with 
their  meats  and  everything  that  goes  out  of  the  country. 

Must  See  that  Quality  Gets  Better  Price 

We  have  been  selling  our  cheese  as  cheese,  just  as  we  have  been  buying  our 
hogs  as  pigs.  We  have  been  talking  quality.  We  have  gone  up  and  down  the 
highways  of  this  Province  for  thirty  years,  and  our  men  from  the  Agricultural 
Colleges,  and  myself  among  them,  twenty  years  ago,  telling  the  farmers  what  to 
do  to  produce  the  very  best.  But  when  they  went  out  to  sell  they  got  the  same 
prices  as  the  fellow  who  produced  something  that  was  not  the  best.  So  you  can 
see  how  far  we  have  gotten  in  the  last  twenty  years.  And  I  say,  it  would  be  a 
calamity  if  we  fail  to  look  ahead  three  or  four  years  and  see  what  is  going  to 
happen.  If  New  Zealand  and  the  other  countries  go  on  and  increase  and  increase 
and  push  us  back,  we  will  find  ourselves  in  regard  to  cheese  just  the  same  place 
as  we  find  ourselves  today  in  regard  to  bacon. 

Danish,  Irish  and  Canadian  Bacon 

We  find  today  Danish  and  Irish  bacon  selling  from  twenty  to  thirty  shillings 
per  cwt.  higher  than  ours.  We  produce  some  of  the  finest  bacon  here  that  is  pro- 
duced on  earth.  I  have  seen  load  after  load  of  Irish  and  Danish  bacon  unloaded, 
and  our  bacon  was  equal,  if  not  superior,  to  any  that  they  can  produce,  but  our 
bacon  goes  over  there  simply  as  bacon;  all  grades  of  it.  We  have  got  to  waken 
up  and  realize  that  the  reputation  of  our  products  in  the  markets  of  the  world 
is  a  great  national  asset.  (Hear,  hear!).  No  country  depending  on  production 
for  the  payment  of  her  obligations  can  afford  to  let  any  man,  firm  or  corporation 
make  or  break  the  country's  reputation.  Canada  has  got  to  see  to  it  that  no  one 
can  play  lightly,  when  the  market  is  good  and  prices  high,  when  you  can  sell 
anything,  to  allow  any  man,  firm  or  corporation  to  bring  in  inferior  stuff  and 


23 

put  it  on  the  market  as  Canadian  goods.  It  is  a  crime.  And  this  country  has 
got  to  waken  up  and  waken  up  fast.  It  makes  no  difference  how  big  the  corpora- 
tion may  be  or  how  strong,  they  are  not  as  big  as  this  country. 

Now,  my  speaking  in  regard  to  these  dairy  products  was  all  leading  up  to 
the  fact  that  there  is  a  tremendous  work  to  be  done,  and  done  in  the  immediate 
future,  and  I   believe,   my  good  friend  Mr.   Sapiro  believes,   and  he   will   show 
you,  there  is  only  one  way  of  doing  it  and  doing  it  effectively. 
Ontario  Grows  Choice  Farm  Products 

We  can  produce  in  this  country  the  finest  quality  of  products;  and  we  pro- 
duce fairly  economioally,  but  there  is  always  scientific  work  to  be  done  and  in- 
vestigation work  to  be  done  especially  with  the  corn  crop  in  this  part  of  the  Pro- 
vince and  the  other  crops  peculiar  to  this  district.  We  cannot  work  with  these 
special  cxops  in  any  of  our  other  stations.  There  is  a  great  work  to  be  done  in 
the  department  of  production,  and  we  hope  to  make  this  station  here  a  centre 
for  the  farmers'  organizations  in  this  portion  of  the  Province.  And  we  want  to 
make  this  institution  one  of  force  in  the  Province,  because  we  feel,  and  I  have 
no  doubt  of  it,  in  the  next  few  years  you  are  going  to  see  the  farmers  of  Ontario 
thoroughly  organized  as  regards  marketing  of  their  products. 

I  went  over  to  the  Old  Country  recently.  I  knew  what  apples  were  selling 
for  here,  because  I  sold  mine  before  I  went.  Good  hand-picked  apples  in  barrels 
were  selling  for  five  and  six  dollars  a  barrel  here.  I  went  over  to  England  and 
saw  Englishmen  paying  from  $21  to  $26  a  barrel.  And  I  said,  '^We  have  apples 
going  to  waste  while  people  in  England  cannot  afford  to  pay  for  apples  at  $31  to 
$26  a  barrel.  If  they  could  get  them  for  $10  a  barrel  it  would  be  better  for  them 
and  better  for  us."  I  talked  to  them  about  it  and  they  said :  "You  must  realize 
that  the  fruit  trade  here  is  in  a  very  tighly  organized  ring.  If  you  can  break 
that  ring  you  have  some  job."  I  looked  it  over,  and  I  said:  "This  problem  can 
be  solved,  but  the  first  work  must  be  done  at  home.  We  must  have  our  own  folks 
at  home  thoroughly  organized  and  then  the  next  step  is  to  handle  the  ring." 
Urging  Co=operation  upon  Niagara  District  Fruit  Men 

I  came  back  and  I  pointed  out  to  the  fruit  men  in  the  Niagara  district  what 
advantages  would  come  from  organization.  That  year  there  were  hundreds  of 
thousands  of  baskets  of  peaches  rotting  in  the  Niagara  district.  Yet  people  could 
not  get  peaches  in  some  localities.  One  day  they  would  ship  peaches  into  Toronto 
until  they  could  not  give  them  away,  and  they  would  rot  and  spoil,  and  then 
they  would  have  none.  These  growers  had  the  experience,  and  they  agreed  to 
Jorganlze.  They  got  their  organization  in  operation,  I  think  along  fairly  safe 
lines.  Mr.  Sapiro  has  made  some  suggestions  for  changes  which  I  think  are 
highly  admirable.  We  were  amateurs.  We  had  not  anybody  to  advise  us.  We 
had  to  U5e  our  own  knowledge  and  form  up  as  strong  an  organization  as  we  could. 
The  Association  was  organized  and  has  been  going  one  season.  It  did  not  get  into 
operation  until  May  9th,  but  they  handled  last  year,  over  one  and  a  half  million 
dollars'  worth  of  fruit.  There  has  been  no  glut  on  the  market  and  the  fruit  has 
gone  to  Winnipeg,  Halifax  and  the  other  cities,  to  suit  their  respective  require- 
ments. 

A  Lesson  with  Asparagus 

I  was  talking  to  one  man  in  Port  Arthur.  I  saw  some  asparagus  for  sale. 
It  was  Niagara  Peninsula  asparagus.  And  I  asked  the  man  how  he  liked  the 
stuff  he  was  getting  from  there.  '^Oh,"  he  said,  "it  is  ifine.  It  is  all  nicely  crated 
.and  we  get  it  every  day,  enough  to  keep  us  going.     Before  we  never  could  get  it 


24 

that  way.  There  would  be  a  carload  and  then  nothing  more,  and  it  would  spoil 
on  us.  But  now  we  get  it  every  day.^'  I  was  talking  to  a  man  in  Toronto.  He 
asked  me  how  the  crops  were  going  to  be  this  year.  I  replied  they  looked  as  if 
they  would  be  very  fair.  "Well,"  he  said,  "Asparagus  is  a  failure,  isn't  it?"  I 
asked  him  why.  He  said,  "We  always  could  buy  asparagus  cheap.  We  could  get 
it  and  buy  it  up  cheap  and  send  it  out  to  the  canners,  but  this  year  we  can't  get 
it.  There  can't  have  been  as  big  a  crop."  But  this  year  was  the  biggest  crop  of 
asparagus  we  have  ever  had,  but  with  the  organization,  it  was  distributed  to  meet 
the  demand.  Consumers  should  always  realize  that  it  is  not  in  their  interest  that 
products,  should  be  wasted.  It  is  not  in  their  interest  that  at  any  time  any  man's 
products  should  be  forced  to  sell  below  the  cost  of  production.  I  am  not  going 
into  the  proof,  but  it  can  be  proved  beyond  disipute. 

The  fruit  men  are  going  on  next  season  and  they  are  going  to  take  in  apples 
and  inside  of  two  more  years  they  will  be  doing  a  business  of  from  five  to  ten 
million  dollars.  I  went  into  a  store  two  weeks  ago  to-night  and  asked  for  some 
Northern  Spies.  I  had  this  year  only  a  few  barrels  myself.  I  was  told  they  hadn't 
any.  Right  in  front  of  me  was  box  after  box  of  my  friend's  oranges  from  Cali- 
fornia. You  can  go  into  any  store  and  see  the  same  thing,  and  90%  of  the  fruit 
you  see  on  display  there  doesn't  come  from  Canada  at  all,  but  from  California, 
Oregon  and  Washington. 

Canadian  Apples  Win  in  England 

We  sent  some  apples  over  to  England  last  September,  and  took,  not  only 
the  £100  trophy  now  on  exhibition  in  the  Parliament  Buildings,  but  we  took 
four  or  five  silver  medals,  against  all  the  world.  That  is  true  of  apples.  I  must 
tell  you  about  cheese.  I  saw  Australia  carry  off  the  trophy  for  the  best  cheeSe 
exhibit,  and  I  said:  "That  has  got  to  stop."  So  we  took  a  space  and  made  an 
exhibit  at  the  Dairy  show  last  fall,  and  we  took  the  first  four  places  for  our  entry 
of  cheese.  So  it  shows  what  we  have  got.  We  have  the  apples.  Why  is  it  we 
haven't  got  the  market?  I  sent  one  of  our  men  to  Scandinavia  to  look  over  the 
possibilities  of  trade  with  them.  The  first  store  he  went  into  in  Denmark  and 
Sweden  were  displaying  British  Columbia  apples. 

I  have  a  letter  from  a  friend  of  mdne,  sent  by  the  Manager  of  the  Co-opera- 
tive Association  of  British  Columbia,  to  his  growers.  He  was  writing  this  letter, 
and  he  was  telling  me  what  they  were  doing  and  what  the  Association  were  doing 
and  he  says  in  the  letter — it  was  very  nice  reading  for  an  Ontario  man — that 
they  had  succeeded  in  getting  the  market  of  the  three  prairie  provinces  which 
we  formerly  had  control  of,  and  then  he  said:  "You  will  also  be  interested  to 
know  we  are  also  shipping  apples  into  the  old  apple  Province  of  Ontario.  Last 
month  we  shipped  thirty  carloads  to  Ontario,  and  we  shipped  fifty  carloads  of 
apples  through  Ontario  into  New  York  City."  He  headed  this  paragraph 
"Carrying  Coal  to  iSTewcastle." 

We  Have  the  Goods— We  Must  Get  the  Markets 

That  is  a  nice  situation!  We  have  the  product  and  cannot  get  the  market. 
WTiy?  Because  we  are  not  organized  to  hold  our  place  in  our  present  markets 
and  to  get  new  markets.  The  Fruit  Association  will  go  after  it  and  get  their 
apples  and  peaches  not  only  in  the  Ontario  markets,  but  they  will  get  a  higher 
proportion  of  the  Western  trade  and  put  our  fruit  in  the  mouths  of  Englishmen 
at  a  better  price,  and  then  it  will  pay  you  and  pay  me  to  keep  five  acres  of  orchard, 
because  we  will  know  the  crop  will  be  moved  of!  rapidly  and  carefully.     I  had  a 


25 

meeting  in  Dresden  last  fall,  and  the  next  day  I  drove  down  to  London,  and  I 
met  a  farmer  and  we  were  chatting  at  his  gate.     And  I  said:  "You  have  a  nice 
orchard."  "Yes,"  he  said,  "but  I  cannot  sell  them,  and   the  hoys   and   I   go   out 
and  pick  what  we  want  for  ourselves  and  shake  the  rest  down  for  the  pigs." 
Organization  a  National  Necessity. 

It  is  necessary  for  us  to  organize  our  agriculture  in  order  to  get  those  mar- 
kets and  to  hold  those  markets.  I  have  the  belief  that  it  is  a  national  necessity 
that  we  get  these  markets  and  hold  them,  and  increase  our  markets — extend  our 
markets.  It  can  be  done  not  by  G-overnments,  but  it  can  be  done  by  you  and  you 
alone.  The  Government  can  help  and  assist  and  direct,  but  anything  that  goes 
from  the  top  down  and  you  shove  down  the  farmer's  throat  will  never  amount  to 
that,  but  something  that  the  farmers  build  themselves  will  stand.  The  farmers 
have  got  to  organize  themselves.  They  must  realize  tliat  selling  of  goods  is  a 
special  line  of  business  and  it  is  just  as  important  as  production.  No  manufacturer 
will  build"^  a  factory  and  manufacture  his  goods  and  then  pile  them  up  and  say : 
'■'What  am  I  going  to  do  with  them?"  No.  As  soon  as  he  had  the  machinery, 
he  would  get  his  selling  staff  organized  and  when  he  was  making  the  stuff  the  sale 
would  be  provided  for.  Now,  we  have  got  to  do  that  in  this  country.  I  hope  to 
see  the  farmers  of  the  country  come  to  realize  this,  too,  that  when  you  sell  some- 
thing off  your  farm  your  interest  in  that  product  does  not  cease.  The  man  who 
is  interested  and  interested  alone  in  satisfying  the  Englishman  when  he  is  eating 
cheese  and  in  creating  in  the  Engldsh  mind  that  it  is  good  cheese,  is  the  man  on 
the  back  concession  here,  milking  his  ten  or  fifteen  cows.  He  is  the  man  and  the 
only  man  who  is  interested.  The  man  in  between,  no  matter  whether  the  price 
goes  up  or  down,  his  margin  of  profit  will  be  the  same.  But  if  the  men  eating 
our  cheese  or  apples  are  not  satisfied  with  the  quality  or  price,  they  won't  con- 
sume them  and  the  market  will  be  lessened.  When  the  market  is  lessened  the 
producer  of  the  stuff  is  the  man  who  is  hit.  So  you  and  I  have  got  to  realize 
we  are  interested  in  our  stuff  from  the  time  it  is  produced  until  it  is  landed  in 
the  consumer's  hands,  and  there  is  only  one  way  we  can  see  to  it;  that  our  goods 
go  to  the  consumer  at  a  proper  price  and  that  is  by  the  farmer  controlling  the 
channels  to  him.  The  wheels  that  have  been  already  set  up  do  not  need  to  be 
destroyed,  but  the  control  must  remain  in  the  hands  of  the  producer. 
A  Personal  Tribute  to  Mr.  Sapiro. 

Mr.  Sapiro  is  and  has  been  giving  me  a  great,  great  help  in  my  work  because 
he  also  realized,  out  in  his  State  of  California,  when  his  farmers  had  their  backs 
to  the  wall,  fighting  for  their  existence,  he  realized  that  the  man  who  had  been 
given  a  chance,  the  same  as  he  had  been  given  by  his  parents,  and  the  same  as  I 
was  given  by  my  parents — no  credit  to  me,  it  is  theirs — should  realize  his  duty  to 
his  fellow  men.  And  the  time  is  at  hand  for  anyone  who  can  do  it  to  step  out 
and  do  it.  because  this  country  to-day  has  the  right  to  dtanand  the  best  of  any 
man  in  the  country,  to  try  to  see  that  we  can,  in  a  few  years  at  the  longest,  enter 
into  an  era  of  prosperity  in  Canada  greater  than  we  have  before  seen.  This  is 
the  last  meeting  in  Canada  at  which  Mr.  Sapiro  will  speak,  and  I  want  publicly 
to  state  that  I  am  indebted  to  him  beyond  words,  and  I  wish  Divine  Providence 
will  be  kind  to  his  children  and  family  from  whom  he  is  separated  for  weeks  at 
a  time  in  fighting  the  battles  for  his  own  country.  If  I  can  reciprocate  at  any  time 
T  shall  consider  myself  indeed  fortunate.  I  know  you  are  going  to  be  fully  re- 
warded for  your  attendance,  in  the  address  you  will  hear  from  ]\Ir.  Sapiro.  (Ap- 
plaiKse). 


POINTS  IN  THE  CALIFORNIA  PLAN 


Mr.  Sapiro  Tells  About  **Pools,"    Five  Year  Contracts,  Qrading,  Financing  and  Other 
Features  Which  Have  Brought  Success 


In  the  closing  meeting  of  the  series  at  Eidgetown,  Mr.  Sapiro  said: 
The  Minister  of  Agriculture  has  shown  you  very  clearly  that  what  you  need 
for  Ontario  Agriculture  is  a  right  type  of  co-operative  marketing  organization, 
and  I  think  every  man  in  the  room  agrees  with  me  and  knows  that  this  is  the  only 
thing  that  Ontario  needs.  But  it  is  not  enough  to  have  a  certain  desire.  It  is  not 
enough  to  want  co-operative  markets.  You  -first  have  to  understand  what  co-opera- 
tive marketing  really  goes  after,  and  after  you  understand  that  you  have  to  be  able 
to  understand  how  you  build  up  the  right  type  of  co-operative  marketing  organi- 
zation. Everything  that  comes  under  the  name  of  co-operative  marketing  is  not 
necessarily  co-operative  marketing,  and  a  great  many  things  which  are  called 
co-operative  are  sure  to  fall  through  because  they  have  not  taken  care  of  certain 
essential  experiences  or  elements  that  have  been  proved  necesary  in  co-operative 
Imarketing  organizations.  So  I  am  going  to  discuss  with  you  this  afternoon  the 
principal  things  that  you  have  to  go  after  when  you  build  a  co-operative  marketing 
association,  and  then  I  am  going  to  explain  to  you  the  things  that  you  have  to 
have  in  your  machinery  if  you  want  success,  and  if  you  know  of  any  association 
which  does  not  correspond  to  that  particular  recipe,  you  can  rest  pretty  well  as- 
sured that  that  co-operative  marketing  association  cannot  work  and  will  not  work, 
because  our  California  farmers  have  been  through  this  for  many  years. 

California  Products  Have  to  Travel  Far  to  Market. 

In  our  State,  away  over  on  the  Pacific  shore,  farther  down  than  British 
Columbia,  we  do  not  raise  anything  in  the  State  that  does  not  have  to  go  two  or. 
three  thousand  miles  to  find  a  consumer.  We  have  no  location  like  Ontario,  with, 
the  population  of  half  of  Canada  right  within  your  selling  radius  and  right  at  the 
door  to  export  to  England.  Everything  we  raise  has  to  go  across  the  continent  and 
pay  transportation  and  icing  costs,  and  still  be  sold  somewhere  at  a  profit  .so  that 
the  growers  can  stay  in  business  and  keep  their  families  alive. 

Our  growers  had  found  they  could  not  do  that.  They  became  desperate. 
They  found  they  were  going  lower  and  lower  in  the  scale  of  living  and  they  had 
to  find  out  how  they  could  keep  themselves  alive  and  still  keep  in  agriculture. 
Some  of  them  had  heard  of  co-operative  marketing  and  they  said :  "We'll  go  ahead 
and  form  co-operative  associations.^'  Some  of  the  men  knew  all  about  the  co- 
operative associations  in  England,  the  Rochdale  Associations.  They  did  not  re- 
alize that  the  English  co-operative  was  a  consumers'  organization.  What  they  did 
in  England  was  to  sell  for  local  consumption.  They  have  the  greatest  consumer 
co-operative  association-  which  is  known  in  the  world.  But  after  all,  our  people 
were  composed  of  a  few  Danes,  and  a  few  were  Germans,  and  a  few  lived  in  the 

26 


27 

Piedmont  section  of  Italy,  and  some,  again,  came  from  Belgium,  and  all  of  these 
knew  something  about  the  co-operative  systems  in  the  old  land,  particularly  the 
Danes.  They  knew  they  had  worked  out  the  right  type  of  organization,  which 
applies  not  to  consumers  but  to  farmers.  The^e  men  went  about  and  said :  ^'There 
is  a  way  out.  All  we  have  to  do  is  to  learn  the  Danish  system,  and  see  if  we  can 
apply  that  system  to  California  conditions.^'  AVell,  we  didn't  have  any  Doherty 
in  California.  If  we  had  had  Doherty  in  California  it  would  have  meant  at  least 
one  hundred  million  dollars  to  us,  and  I  will  tell  you  why. 

Early  Co=operators  Had  to  Stumble  Along  for  Twelve  Years 

Our  farmers  out  there  had  no  guidance  at  all,  and  they  had  to  stumble  along 
for  more  than  twelve  years,  with  failure  after  failure,  because  our  State  gave  us 
no  guidance  and  our  coUege  gave  us  no  guidance. 

What  our  growers  did  was  this:  They  would  start  an  organization  and  fail, 
then  they  would  study  that  organization.  They  would  not  get  the  idea  that  so 
many  men  have — here  is  an  organization  we  have  built  up  and  it  must  be  right 
because  we  built  it.  No,  they  studied  its  failure  and  saw  why  it  didn't  work  and 
made  a  new  start.  They  would  try  to  ascertain  whether  the  failure  was  in  the 
kind  of  organization  or  in  the  contract,  and  in  each  case  they  achieved  something 
better  and  something  better,  but  it  took  them  twelve  years  to  do  it,  but  they  did  it. 
But  when  the  twelve  years  were  over  the  California  farmer  had  learned  how,  and 
since  1910  those  California  farmers  have  developed  a  technique  for  the  handling 
of  these  commodities  so  that  they  know  what  is  the  right  form  for  perishable 
products  and  for  semi-perishable  products  and  what  is  the  proper  and  correct 
form  for  non-perishable  products. 

We  handle  over  three  hundred  million  dollars  worth  of  goods  every  single 
year  through  our  eighty-three  different  associations.  We  handle  strawberries  and 
peaches,  grapes,  cherries,  dried  fruits,  currants,  raisins,  pears,  apples,  prunes, 
apricots,  olives.  Then  again,  canned  fruit,  small  vegetables,  beans,  lima  beans, 
walnuts,  alfalfa,  barley,  poultry,  eggs,  butter,  milk,  figs,  in  fact,  everything  ex- 
cept live  stock  and  the  things  that  are  controlled  by  the  Japanese.  Our  farmers 
have  learned  how;  they  have  made  California  a  big  laboratory.  They  have  learned 
how  to  organize  co-operative  marketing  associations,  and  to-day,  if  you  go  to  any 
of  the  clever  California  leaders  or  any  of  the  real  California  farmers,  they  can 
give  you  the  points  you  have  got  to  have  in  any  co-operative  society  and  if  you 
do  not  have  them  in  the  co-operative  you  can  not  possibly  expect  it  to  work. 

I  will  give  vjou  those  test  points,  because  you  are  going  to  have  these  move- 
ments developed  in  this  country,  and  while  I  know  Mr.  Doherty  is  going  to  lead 
you  right,  you  men  have  to  be  equipped  to  do  leading  yourselves  and  to  do  testing 
yourselves. 

What  Are  Co=operative  Associations  Organized  For? 

The  first  thing  you  will  think  of  is:  What  in  the  world  do  men  organize  co- 
operative associations  for?  Wliat  is  the  thing  they  aim  at?  In  California  here 
is  how  we  put  it :  We  say  the  aim  of  co-operative  marketing  is  to  stop  the  dumping 
of  agricultural  products.  By  dumping  we  mean  this :  You  just  throw  it  on  the 
market  as  fast  as  you  can.  You  do  not  think  about  what  the  other  man  has  or 
is  likely  to  bring  to  market;  you  do  not  know  the  absorbing  capacity  of  the  im- 
mediate market.  You  do  not  know  whether  Detroit  or  Cleveland  or  Buffalo  can 
take  more;  you  do  not  know  how  far  your  products  can  be  carried  and  still  sell; 


28 

you  do  not  know  the  marketing  conditions  of  your  product,  so  you  just  bring  it 
in  to  the  nearest  man  you  can  find,  or  commission  house  or  whatever  it  may  be  and 
you  throw  your  product  at  him.  What  happens?  Each  grower  throws  his  pro- 
duct against  the  other  man.  It  isn't  the  speculator  who  breaks  the  price  of  agri- 
cultural products,  it  is  the  grower  who  breaks  the  price.  The  speculator  stands 
aside  and  picks  up  things  at  the  low  price  which  the  grower  makes  by  dumping. 
We  stopped  that  in  California.  Instead  of  dumping,  we  saw  that  the  fanmers 
have  to  learn  to  merchandise  their  products.  And  by  that  we  mean  to  control 
the  flow  of  their  products,  that  they  flow  into  the  markets  of  the  world  in  such 
quantities  and  at  such  times  that  the  markets  can  absorb  them  and  at  a  fair  price. 

Principles  in  Co=operative  Methods. 

We  say  in  merchandizing  the  first  thing  to  do  is  properly  gnade  your  pro- 
.•djuots.  Grade  it  upwards,  and  make  sure  the  thing  you  are  selling  can  have  a 
brand  name  put  on  it,  and  it  is  always  the  highest  quality  of  that  product  that  is 
brought  on  any  market.  We  spend  hundreds  of  thousands  of  dollars  in  inspecting 
everything  that  is  delivered  to  the  co-operative  associations.  We  go  hehind  that, 
we  go  to  the  farmer  and  try  to  get  him  to  begin  to  produce  high  class  things. 

The  second  step  is  that  your  package  has  to  be  perfect.  You  have  to  figure 
out  a  package  that  will  stand  the  travel  to  the  markets  at  which  you  expect  your 
product,  not  to  be  sold  but  to  be  eaten,  and  then  your  package  has  to  be  one  that 
is  convenient  to  the  person  who  is  going  to  use  the  product  or  commodity  when 
he  gets  it.  Take,  for  example,  things'  like  celery.  Our  growers  used  to  put  it  in 
packages  which  were  perfectly  all  right  until  they  got  to  San  Francisco  and  the 
^commission  men  got  them,  but  we  got  rotten  prices  and  we  wondered  why,  and 
then  we  discovered  they  weren't  packed  right.  They  were  packed  to  reach  San 
jFrancisco  but  they  didn't  reach  Chicago  all  right,  and  Ave  lost  piles  of  money 
through  that  carelessness.  They  bruised.  Take  prunes.  We  learned  that  people 
did  not  like  to  buy  prunes  out  of  twenty-five  pound  boxes.  They  were  exposed  in 
the  stores  and  the  dirt  blew  in  on  them  and  the  women  did  not  care  to  buy  them. 
So  we  put  them  up  in  two  pound  boxes  which  is  the  unit  people  like  to  buy  so 
you  can  buy  prunes,  sealed  in  two  pound  boxes  and  you  can  know  it  is  just  as 
good  and  clean  as  when  it  left  California  and  the  packing  house  there.  The  first 
step  is  to  pay  attention  to  grading  and  quality,  and  the  second  is,  to  the  package, 
60  that  it  will  reach  the  consumer  in  the  right  condition. 

Markets  Must  be  Hunted  Up. 

We  went  all  over  the  world  to  find  markets  for  our  products.  With  perish- 
able products  we  found  out  how  far  it  was  possible  to  go.  We  figure  how  many 
days  any  of  these  things  can  travel  and  then  we  find  every  single  market  within 
that  circle,  and  then  we  get  a  big  map  and  draw  a  circle  around  and  include 
every  city  that  can  possibly  take  our  perishable  products,  and  we  say :  '""WTiy 
aren't  we  selling  them  there  ?"  If  we  find  someone  else  is  selling  a  better  product 
at  a  cheaper  price  we  throw  our  hands  up,  hut  if  we  find  they  did  not  take  them 
because .  they  didn't  know  about  them^,  or  if  we  find  someone  else  is  putting  a 
poorer  thing  in  there  or  something  we  can  match  we  go  in  and  compete.  In 
one  case  we  extended  from  twelve  original  points  to  three  hundred  and  twenty 
points  of  sale.  We  search  out  as  far  as  our  product  can  go.  We  find  the  markets, 
and  if  we  can't  find  the  markets  we  create  them.  We  sent  to  Japan  and  to 
England,  and  find  out  how  we  can  increase  the  consumption  of  certain  of  our 
products.     We  noticed  that  English  people  eat  more  canned  pears  than  canned 


29 

peaches.  So  we  tried  to  bring  about  consumption  of  pears  in  American  cities 
equal  to  the  consumption  of  peaches.  So  we  put  on  an  advertising  campaign 
in  the  city  of  Boston,  and  through  the  newspapers  urged  the  people  to  eat  canned 
pears.  We  increased  the  consumption  of  canned  pears  in  the  city  of  Boston  this 
year  by  a  litle  more  than  three  hundred  per  cent,  just  by  putting  on  the  right 
kind  of  merchandizing  campaign.  Our  Association  did  that,  not  the  canners, 
although  they  had  sold  our  fruit  to  the  canners.  But  we  can  go  to  the  canners 
and  show  them  it  is  possible  to  increase  the  market  for  pears,  when  they  told 
us  we  could  not.  We  have  shown  them  that  there  was  a  market,  and  we  are  going 
to  get  a  much  better  price  for  our  pears  this  year  than  we  did  last  year,  and 
last  year  we  made  a  profit  on  our  pears. 

Some  Markets  Must  be  Actually  Created 

In  short,  we  actually  search  out  not  only  where  we  can  find  markets  but  where 
we  can  create  markets.  We  sell  our  pears  all  over  this  country,  either  as  fre=h 
pears,  canned  pears  or  dried  pears,  and  we  investigate  each  type  and  the  con- 
sumption possibilities  of  each  type  so  we  can  move  everything  we  raise  into 
the  farthest  and  greatest  number  of  markets  of  the  world  we  can  possibly  reach. 
So,  in  merchandizing  you  must  understand  your  markets  and  extend  them  by 
time  and  by  place.  But  it  is  no  use  doing  that  unless  you  learn  how  to  control 
the  flow  of  your  products  so  they  go  through  a  single  channel.  It  is  no  use 
having  eight  hundred  cheese  factories  in  one  part  of  the  Province  of  Ontario, 
each  one  of  these  fellows  selling  when  he  feels  like  it.  There  is  no  use  of 
finding  great  markets  or  developing  a  great  market  unless  there  is  a  central  office 
that  controls  the  flow  of  the  market.  Remember,  with  perishables  the  great  aim 
is  to  see  that  every  market  gets  as  much  as  it  can  absorb,  and  that  no  market 
has  a  glut  and  no  market  has  a  famine.  Individuals  cannot  handle  it,  individual 
commission  houses  cannot  handle  it.  You  have  to  have  the  crop  moving  under 
central  guidance  so  it  goes  out  in  the  right  amounts  and  each  and  every  market 
gets  what  it  can  properly  absorb.  Then,  when  you  improve  your  market  by 
advertising,  fully,  what  do  you  strive  for? 

The  Placing  of  Prices 

Do  you  fully  understand  what  I  mean  when  I  stay  the  price  should  be  made 
by  supply  at  the  point  of  consumption,  and  not  at  the  point  of  production?  When 
we  set  out  to  form  a  California  co-operative  we  say  the  thing  we  are  going  to  do 
is  to  merchandize  the  products  and  in  merchandizing  it  these  are  the  principles. 
First,  grade  it  and  make  the  quality  and  standard  perfect.  Second,  pack  it  right. 
Third,  extend  the  time  and  place  of  marketing.  Fourth,  move  it  out  through 
a  central  channel  so  that  each  place  gets  as  much  as  it  can  absorb  at  the  particular 
time  and  no  more,  and  then  the  price  will  fix  itself  on  the  basis  of  supply  at  the 
point  of  consumption  instead  of  supply  at  the  point  of  production. 

Of  course,  we  help  that  out  by  advertising.  Four  of  our  Associations  alone 
spend  more  than  two  million  dollars  a  year  in  advertising.  We  get  people  to 
eat  our  products.  And  so  these  are  things  we  admit  are  not  as  good  as  your 
Ontario  product^,  but  we  get  better  net  returns  for  our  prodaicts  in  California  than 
you  men  do  with  your  superior  products  and  right  at  the  door  of  the  English 
markets,  because  you  have  the  products  but  we  have  the  products  plus  merchan- 
dizing organization.  Therefore  you  must  set  out  and  merchandize  your  product. 
If  you  have  any  little  savings  in  mind,  for  fertilizer  or  such  like,  it  isn't  worth 
anything. 


30 

Local  Competition  in  Stores  Not  Desirable 

I  do  not  object  to  economy,  but  I  object  to  people  putting  their  energies  into  the 
wrong  channel.  Do  not  set  up  stores  in  competition  with  those  that  are  already  per- 
forming their  work  in  a  good  way,  to  get  little  cheap  economies,  but  first  solve  the 
great  big  problems  and  the  others  will  take  care  of  themselves.  I  do  not  object 
to  consumers'  stores,  but  where  farmers  establish  stores,  they  must  do  so  as  con- 
sumers and  not  as  producers.  They  are  solving  little  problems  by  setting  up  far- 
mers' stores.  But  do  not  let  people  get  you  off  the  main  drag.  You  must  have 
a  leader  who  will  show  you  how — you  need  an  organization  to  stop  you  from 
dumping  your  products.  You  have  one  kind  of  machine  for  perishable  products 
and  another  kind  for  semi-perishables  and  still  another  kind  for  non-perishable 
products.  With  non-perishables  the  problem  is  storage  and  finance,  with  perish- 
ables it  is  routing. 

Importance  of  Incorporation 

The  next  lesson  was  that  you  have  got  to  incorporate  every  association  under 
some  sort  of  co-operative  marketing  law.  We  decided  that  the  only  kind  of  organ- 
ization that  was  right  for  co-operative  marketing  was  a  pure  business  type,  usually 
\vithout  capital  stock,  usually  on  a  non-profit  basis,  without  a  cent  of  investment 
going  in  on  the  part  of  the  growers.  We  organized  them  on  the  non-profit  basis 
so  the  Association  cannot  make  a  cent  for  itself,  and  prohibiting  the  Association 
from  handling  anything  for  outsiders.  They  will  not  even  let  a  lawyer  in  one 
of  these  Associations;  they  are  pure  farmer  and  nothing  more,  all  the  way  through. 
Then  these  Associations  are  organized  like  a  business,  non-profit,  non-speculative, 
and  farmers  only,  and  the  basis  of  production  is  a  written  contract  with  the  grower. 
Some  men  go  around  thinking  that  all  they  need  to  do  is  to  incorporate  it,  and  have 
some  good  fancy  by-laws,  and  then  stand  back  and  watch  it  work.  You  never  heard 
of  a  business  man  working  that  way.  He  sees  he  has  a  proper  organization  to 
sell  something  and  then  he  will  tie  up  every  man  with  a  contract,  to  deliver  his 
product  to  the  Association.  Do  not  get  the  idea  that  because  you  have  in  the 
by-law  that  every  man  is  bound  by  the  rules  and  regulations,  that  you  can  make 
him  deliver. 

See  That  all  Contracts  are  Clear  and  Binding 

The  contract  has  to  be  clear  and  plain  in  all  of  its  terms,  and  tell  just  what 
the  obligation  of  the  grower  is  and  what  the  paying  obligation  of  the  Association 
is,  and  it  should  tell  all  those  things  as  far  as  it  can  be  foreseen.  We  wouldn't 
dream  of  organizing  an  association  in  California  to-day  without  a  definite,  ex- 
pressed contract  between  the  grower  and  the  association,  telling  exactly  what  the 
rights  and  duties  of  each  are  and  what  the  privileges  of  the  association  would  be, 
and  we  would  not  think  of  organizing  under  one  year  contracts  any  more.  We 
use  five  year,  six  year  and  eight  year  contracts.  We  realize  if  the  growers  are  going 
into  the  organization  they  are  going  into  it  on  the  right  basis,  to  give  it  a  chance 
to  develop  the  right  men  and  the  right  financial  connections  and  right  mercantile 
connections.  If  you  go  to  a  man  with  a  five  year  contract,  he  will  deal  with  you 
when  he  would  not  deal  with  you  for  one  year.  When  he  knows  you  have  the. growers 
tied  up  for  five  years  he  deals  with  you,  because  he  does  not  want  to  run  any  risk, 
and  he  knows  in  five  years  you  can  set  up  a  competitor  if  he  gets  too  rambunctious. 
We  do  not  deal  any  more  with  fly-by-night  markets.  We  do  not  believe  in  ropes 
of  sand;  we  believe  in  ropes  of  steel.    We  have  contracts  that  the  growers  cannot 


31 

break.  Some  people  have  come  in  and  thought  they  could  break  their  contracts. 
Then  we  go  after  them.  We  are  the  fellows  from  whom  they  get  it,  and  we  not  only 
get  liquidated  damages,  but  we  get  injunctions  to  prevent  them  from  delivering  to 
anybody  else,  and  we  get  decrees  for  non-delivery  and  then  we  make  them  pay  the 
costs  of  chasing  them  up.  And  that  is  not  a  law  of  the  State  of  California.  That  is 
a  law  as  we  have  worked  it  out  on  English  equity  decisions.  So  we  worked  out 
these  strong  and  forceful  contracts.  If  a  grower  signs  a  contract  he  delivers  the 
goods.  "We  know  in  advance  what  the  welcher  will  do.  He  will  deliver  and  he  will 
pay  all  our  costs  in  making  him  deliver. 

How  the  "Pool"  Works. 

One  other  thing.  We  always  provide  in  California  for  an  internal  pool. 
Take  tohacco.  We  would  provide  that  any  man  who  shall  receive  the  same  net 
price  for  that  one  year  as  any  other  person  delivering  the  same  quality  or  grade 
in  that  one  year.  You  all  know  about  the  pooling  law  and  you  want  to  have  it 
in  your  contract,  because  if  it  isn't  in  there  will  be  trouhle.  Do  not  leave  anything 
to  chance.  Eemember  that  good  motive  is  not  anything.  You  must  have  the  right 
technique  and  method. 

Must  Have  Long  Term  Contract. 

So  you  must  have,  in  a  good  co-operative,  a  long-term  contract,  a  strong 
enforceable  contract,  a  contract  that  provides  for  pooling,  and  albove  all  a  contract 
that  gives  you  a  chance  of  financing  your  product.  If  it  is  a  perishable,  you  do 
not  care  so  much,  because  all  you  do  is  ship  it  and  get  your  money  back  within 
a  circuit  of  ten  or  twenty  days.  If  it  is  a  non-perishable  you  have  to  put  up  that 
product  as  a  collateral  and  let  the  Association  borrow  money  on  it.  Suppose  you 
were  a  banker,  and  a  man  came  to  you  with  a  co-operative  proposition  and  said 
he  wanted  you  to  lend  him  money  on  this  thing.  Suppose  the  contract  did  not 
say  anything  about  title  passing  or  pooling,  what  would  you  say?  You  would 
say:  "I  don't  think  I  can  lend  you  money."  And  he  would  say,  ''Why?"  And  if 
you  wanted  to  he  perfectly  frank  and  tell  him  what  was  wrong  you  would  say : 
''How  do  you  know  you  have  title  to  the  products?  How  do  I  know  that  if  you 
don't  pay  that  I  can  sell  the  things?"  In  this  Province  a  hanker  has  not  the 
assurance  that  title  passes.  But  the  banker  is  not  your  enemy,  becauses  he  refuses 
to  lend  you  on  those  contracts.  Perhaps  it  is  we  who  are  at  fault  and  not  the 
banker.  But  we  get  furious  because  he  will  not  do  something  v/hich  he  as  a  banker 
does  not  dare  to  do,  and  we  are  at  fault  because  we  did  not  provide  for  it  away 
back  and  give  him  something  safe  to  lend  money  on. 

We  went  after  that  year  after  year,  in  California,  until  we  hammered  out 
the  way  in  which  we  could  guarantee  our  product  and  make  it  sure,  so  the  banker 
would  be  satisfied  with  the  contract.  So  you  want  the  right  kind  of  contract. 
You  sign  that  contract — you  won't  have  to  sign  it  more  than  the  once — and  it  will 
stand  up  in  the  banks  and  in  the  courts  and  you  have  a  real  Association. 

Get  the  Right  Man  to  Run  the  Business. 

After  you  have  the  organization  completed,  you  must  be  dead  sure  you  have 
the  proper  man  to  run  it.  We  say  it  is  the  biggest  industry  in  California,  and 
we  will  not  treat  it  as  a  step-child.  We  will  get  the  best  men  to  handle  our  busi- 
ness we  can.  We  do  not  get  men  who  have  been  trucking.  We  get  the  best  men 
we  can  and  we  pay  them  decent  salaries  to  serve  us  and  to  serve  us  alone.     Why, 


32 

we  go  to  the  railroad  and  get  traffic  managers ;  we  go  to  the  newspapers  and  we  get 
publicity  managers;  we  go  to  the  business  world  and  we  get  salesmen.  We  have 
no  amateurs.  Our  growers  have  learned  that  they,  as  individuals  can't  sell  agri- 
cultural products  and  stand  together,  but  organized  and  standing  en  masse,  their 
mo2iey  can  hire  the  best  brains  in  the  country  to  serve  them.  And  so  they  run  it 
in  just  the  saime  way  as  any  big  business  is  run  in  your  land  or  in  my  land.  We 
have  learned  that  the  whole  thing  is  to  put  business  methods  into  agriculture, 
and  we  have  to  organize  with  the  right  machinery  and  employ  specialists  to  run 
the  machine.  That  is  theoretical.  Will  you  be  patient  while  I  tell  you  what  we 
have  done  in  one  year  with  one  big  industry  in  the  United  States  ? 

Tliis  thing  originated  with  us  in  California,  but  it  spread  all  over.  Tlio 
cotton  men  began  to  organize  and  the  tobacco  men  began  to  organize,  and  even  the 
maple  syrup  men  in  New  York  State.  It  is  a  natural  consequence  all  over  the 
country. 

The  Great  Tobacco  Co=operative  Campaign. 

You  are  tobacco  men.  In  Tennessee,  Indiana,  West  Virginia  and  part  of  Miss- 
ouri they  grow  Burley  tobacco  which  is  not  any  better,  if  it  is  as  good,  as  you  men 
produce  in  Ontario,  and  your  average  production  is  about  two  hundred  pounds 
heavier  per  acre  than  the  Kentucky  district.  We  will  assume  you  grow  good  Burley. 
Now,  these  growers  were  pretty  well  broke  by  the  buyers.  Down  there  there  were 
warehouses  all  over  through  these  districts,  great  big  auction  warehouses,  and  the 
grower  would  trade  his  tobacco  and  dry  it  and  tie  it  together  in  hands  and  bring 
it  in  to  the  big  warehouses  and  put  it  out  on  the  baskets  and  the  buyers  would 
go  out  and  buy  it.  There  are  only  a  few  big  firms  who  are  really  buying :  Liggett- 
Meyers,  United  States  Tobacco  Co.,  Lorillard  Company,  and  each  one  of  these 
companies  Avould  have  a  man  at  each  one  of  the  warehouses  and  the  buyers  would 
simply  walk  down  the  rows  in  the  warehouses  and  they  Avould  pretend  to  grade 
the  tobacco  and  pretend  to  compete  against  each  other,  and  they  would  buy  in 
at  the  rate  of  one  basket  every  four  seconds,  or  an  average  of  fifteen  sales  to  the 
minute.  You  cannot  tell  me  any  individual  could  grade  tobacco,  going  through 
at  that  rate.  You  and  I  know  they  would  simply  make  a  guess,  figure  the  average 
against  the  farmer  and  make  a  bid.  In  two  seconds  they  knew  the  limit  as  to 
bids  and  they  operated  then  as  one  buyer  buying  in  the  crop.  These  men  would 
go  up  and  do-wTi  and  perhaps  buy  all  the  tobacco. 

Tragedy  of  Former  Tobacco  Days. 

Tliese  growers  would  raise  between  230  and  250  million  pounds  for  the  mar- 
ket. They  simply  dumped  their  tobacco  against  each  other,  and  the  result  was  the 
tobacco  growers  were  the  poorest  farmers  in  all  the  country  except  a  few  of  the 
cotton  growers.  They  came  down  to  such  a  tvpe  of  poverty  as  I  hope  vou  will 
never  see.  They  became  desperate;  they  did  what  they  called  night  riding,  and 
would  go  and  destroy  the  crops  of  people  who  would  not  stand  in  with  them. 
Finally  they  went  to  Judge  Dingan,  the  editor  of  the  Courier,  and  he  is  the  fiiiest 
leader  of  any  kind  we  have  in  the  South.  He  never  knew  that  the  people  of 
Kentucky  lived  as  these  people  explained  to  him,  or  in  Tennessee.  He  was  very 
much  interested,  and  he  went  to  New  York  and  took  it  up  with  certain  bankers 
there,  and  they  said  there  was  only  one  way  to  it — send  somebody  to  California 
and  see  if  they  could  work  out  a  plan  like  ours  for  their  tobacco.  Judge  Dingan 
did  it. 


33 


How  the  Clouds  Were  Lifted, 


This  plan  was  presented  to  them  in  March  of  a  year  ago,  and  they  did  not 
do  any  contracting  until  late  June  or  July.  They  got  every  Burley  grower  they 
tould  to  sign  the  agreement  that  he  would  deliver  all  the  Burley  tobacco  he  could ; 
that  the  Association  would  grade  it  and  put  it  into  bales  and  sell  these  bales 
and  take  the  cost  of  doing  business  out  of  the  funds,  and  return  the  net  earnings 
to  the  grower  so  that  every  grower  would  get  the  same  price  for  the  same  quantity 
and  quality.  The  directors  would  go  in  the  same  pool,  and  if  they  wanted  to  put 
a  charge  on  some  other  man's  tobacco  the  charge  had  likewise  to  go  on  their  own. 
That  is  the  principle  of  internal  pooling.  No  advantage.  There  is  no  capital 
stock,  it  is  a  non-profit  association,  to  be  composed  of  only  Burley  tobacco  growers, 
and  they  get  it  signed  -up  in  Ohio,  Indiana,  Kentucky,  Tennessee  and  West  Vir- 
ginia and  everywhere  Burley  is  grown.    It  is  a  long  contract  and  a  strong  contract. 

They  had  a  plan  whereby  they  could  buy  up  separate  corporations  and  these 
separate  co-operatives  would  have  all  the  money  and  guarantees  for  the  ware- 
housing co-operatives  that  they  would  buy  in  the  properties  over  a  period  of  five 
years  by  a  small,  moderate  taxation  upon  the  returns  of  the  growers.  They  were 
limited  to  two-fifths  of  one  cent  per  pound  each  year.  That  is  the  old  method 
by  which  the  growers  gradually  acquire  the  property  they  need  from  deductions 
from  sales. 

Do  Not  Mix  Warehousing  and  Marketing. 

You  must  never  have  your  warehousing  association  the  same  as  your  marketing 
association.  The  warehousing  association  has  to  be  in  a  position  to  issue  legal 
receipts  upon  which  you  can  borrow  money,  and  they  cannot  issue  warehouse 
receipts  on  their  own  products.  So  we  have  to  establish  the  organization  and 
guarantee  the  produce  in  the  warehouse,  the  tobacco  that  moves  through  to  the 
marketing  association,  and  we  have  to  agree  to  pay  up  to  2/5  of  one  cent  per 
pound  every  year  towards  the  purchase  of  these  necessary  buildings.  That  is  the 
limit,  we  don't  have  to  go  that  high,  and  probably  will  not  need  to  go  that  high, 
in  Kentucky.  The  contracts  were  for  five  years,  plus  1921,  if  they  could  get 
organized  by  November  15th,  1921.  Then  they  appointed  a  committee  of  grower? 
to  see  if  they  could  do  this  work  and  get  the  signatures. 

Long  Time  Agreements  Important. 

Judge  Dingan  was  the  Doherty  of  Kentucky.  He  acted  as  Chairman  of  that 
committee.  He  worked  out  the  plans  for  that  sign-up  campaign,  and  the  result 
was  that  before  November  15th,  they  had  signed  up  much  more  than  seventy-five 
per  cent,  of  the  entire  Burley  acreage  in  Kentucky.  Ohio  and  Indiana.  As  a 
matter  of  figures,  they  had  55,710  contracts  with  individual  Burley  tobacco  growers 
under  which  every  one  of  those  members  has  to  deliver  his  tobacco  to  the  asso- 
ciation for  the  year  192-1  and  five  years  thereafter.  The  association  was  then 
incorporated.  Do  you  know,  Kentucky  did  not  have  a  good  law  for  that,  so  they 
even  had  to  put  a  law  through  so  they  could  incorporate  it  i;nder  the  laws  of  Ken- 
tucky. In  the  meantime  we  incorporated  it  under  the  laws  of  North  Carolina 
so  we  could  operate.  You  are  lucky  here.  Your  laws  are  easy  enough  to  enable 
you  to  do  anything  you  need  to  in  the  way  of  organization.  "We  have  forty-eight 
great  States  but  no  two  of  them  have  the  same  laws. 


34 

Settling  the  Warehouse  Problem. 

But  we  did  this,  and  then  came  our  problem:  How  are  we  going  to  get  this 
tobacco,  how  are  we  going  to  grade  it,  how  are  we  going  to  warehouse  it,  how  are 
we  geing  to  dry  it,  and  above  all,  how  are  we  going  to  give  the  growers  some 
money  on  the  day  they  deliver  their  tobacco?  Because  they  have  to  have  money, 
unless  the  co-operative  association  harms  them  more  than  it  helps  them.  As  we 
said,  we  have  got  the  places  in  which  to  receive  the  tobacco — we  believe  receiving 
points  must  be  arranged  at  every  local  point  where  the  growers  needed  them.  They 
must  be  made  convenient  for  the  growers  to  deliver  their  product.  So  we  got 
the  warehousemen's  contract.  We  said:  ''^^e'll  be  frank  and  fair,  we  are  going 
to  make  a  proposition  to  every  warehouseman  in  the  Burley  district  to  pay  for  his 
room  for  five  years,  and  we  will  pay  a  good  price,  but  it  will  only  be  for  the  fair 
value  of  his  physical  property  as  reached  by  arbitrators.'"  So  we  drew  out  a  con- 
tract fair  to  both  sides,  as  we  thought,  and  we  called  a  meeting  of  the  warehouse- 
men. We  held  four  meetings  of  warehousemen  and  we  signed  up  117  warehouses 
in  that  whole  Burley  district.  Only  13  warehouses  in  all  that  Burley  territory 
refused  to  come  in  with  the  growers.  We  took  immediate  possession  of  these  ware- 
houses under  those  arrangements.  We  put  managers  in  charge,  usually  the  old 
warehouse  managers  who  knew  the  men,  and  generally,  the  men  thought  they 
were  fair — put  those  men  in  charge  and  got  ready  to  receive  the  tobacco. 
Getting  Over  the  Grading  Difficulty. 

We  had  always  been  told  that  tobacco  couldn't  be  graded  by  the  growers.  That 
is  true,  but  you  can  get  men  who  do  know  how.  We  located  Mr.  James  Stone, 
of  Lexington,  and  secured  him  as  our  general  manager.  He  was  not  chiefly  a 
farmer.  He  was  a  warehouseman  who  had  been  a  tobacco  buyer,  and  who  was  a 
director  of  banks,  and  a  man  who  believed  that  he  could  not  only  be  of  national 
service  but  be  a  big  man  in  his  own  territory.  He  sent  for  some  of  the  best  men 
he  knew.  He  said :  "I  want  to  set  up  a  set  of  grades  so  that  I  will  know  just  what 
the  tobacco  is  this  man  delivers  to  me,  so  I  can  give  him  a  receipt  showing  to  the 
dot  what  his  credit  is."  They  worked  it  out,  and  in  about  a  week  they  set  up  a 
new  grading,  the  first  scientific  grading  ever  known  on  this  continent.  They  have 
fifty-two  grades.  They  took  it  from  the  ground  up,  on  the  stalk,  on  the  type  of 
leaf,  and  as  it  is  in  color.  Then  they  have  a  series  of  numbers  telling  the  color 
and  condition  of  each  of  these  leaves.  They  have  a  series  which  absolutely  covers 
the  grading  field.  Then  Stone  advertised  for  graders,  and  men  came  who  thought 
they  could  grade.  Then  he  sent  around  for  tobacco  leaves  and  he  put  these  men 
to  school  to  learn  how  to  grade.  He  gave  them  examinations  and  those  who  got 
eighty  per  cent,  were  kept,  and  those  who  couldn't  make  make  eighty  per  cent, 
were  dropped  out,  and  others  taken  on.  No  grader  grades  tobacco  in  his  own 
home  district.  No  grader  grades  tobacco  knowing  whose  tobacco  he  is  grading. 
We  announce  to  the  growers  when  they  could  deliver  the  tobacco,  and  on  the  day 
that  the  grower  delivers  at  the  warehouse  there  is  a  technical  grader  ready  to 
take  his  tobacco  and  tell  him  he  has  75  lbs.  of  our  grade  1 ;  84  lbs.  of  our  grade 
2;  and  so  on.  Before  the  grower  goes  away  that  day  he  has  a  complete  appraisal 
or  receipt  telling  Just-  how  much  of  each  grade  of  tobacco  he  has  delivered  and 
the  grades  are  the  same  in  Tennessee  as  in  Kentucky — universal  grades. 
Banks  and  the  Co=operative  Men. 

The  third  big  job  was  how  we  were  going  to  get  the  money  to  give  the  growers 
an  advance  payment  on  the  day  they  delivered  the  tobacco.     We  got  our  grading 


35 

fixed,  and  then  we  called  for  a  meeting  of  representatives  of  the  banks.    We  said : 
"Here's  what  we  are  doing,  we  are  setting  up  this  thing  and  we  are  going  to  be  good 
and  business-like  about  it,  we  want  you  bankers  to  see  just  what  we  are  doing.'' 
They  said,  "Yes,  yes,  it  looks  very  nice."    We  said,  "We  are  grading  the  tobacco." 
"Yes,"  they  said,  "but  what  does  it  all  amount  to  ?"    "We  are  grading  the  tobacco 
so  that  when  we  ask  you  to  lend  us  money  you  will  know  what  this  means.     You 
don^t  know  whether  tobacco  is  worth  60c.  a  pound  or  45c.  a  pound  because  you 
don't  know  its  grade,  but  we  are  setting  up  a  system  of  grading  so  we  will  be  able 
to  tell  you  just  what  every  hogshead  is  worth,  so  when  you  make  the  loans  on  that 
you  will  know  you  are  safe."    The  bankers  were  interested  in  that,  and  they  sent 
their  men  down  to  see  what  we  were  doing.     But  when  we  wanted  to  borrow 
money,  they  said,  "Have  you  got  title?"    "Yes,"  we  said,  and  we  showed  our  con- 
tracts to  sell  in  pooling  quantities.    The  bankers  went  away  and  they  wrote  a  let- 
ter and  asked  us  what  we  wanted.    We  said :    "We  want  you  to  send  your  tobacco 
men  down  to  see  what  you  will  lend  on  each  type  of  tobacco,  40c.  a  pound  on  C.3., 
60c.  a  pound  on  C.4.  (cigar  wrappers)  and  such  and  such  a  grade."     These  bank- 
ers thought  about  it  and  hesitated.     We  then  met  with  a  group  of  city  bankers 
and  went  over  that  proposition  and  showed  them-  that  they  were  lending  that  money 
to  the  dealers,  and  we  wanted  them  to  lend  it  to  us  and  it  would  be  loaned  more 
safely  because  we  had  the  tobacco  to  put  up  as  collateral.    The  result  was  the  bank- 
kers  agreed  to  lend  us  one  and  a  half  million.    And  then  a  smart  lawj^er  got  busy 
with  them.    This  thing  was  unconstitutional  under  the  Trust  Company  laws.    We 
admit  he  was  a  much  greater  lawyer  than  any  we  had  connected  -^vith  our  associa- 
tion, but  he  couldn't  convince  his  own  banker  that  he  was  right,  and  Mr.  Brown, 
one  of  the  biggest  bankers  there,  got  up  and  said :    "I  believe  this  thing  is  sound, 
and  I  am  ready  to  lend  them  half  a  million  no  matter  what  any  of  the  other  bank- 
ers think."    And  we  found  we  could  get  one  million  from  the  bankers  in  Louisville. 

More  Money  was  Needed  and  was  Got. 

But  that  was  rotten!  We  needed  at  least  $l,30'0',0i00  to  $1,500,000  for  one 
week's  delivery  and  at  least  three  weeks  in  which  we  would  redry  that  tobacco  and 
'convert  it  into  other  security  and  then  borrow  money  from  outside  banks  if  we 
had  to.    So  we  had  to  have  four  million  for  immediate  financing. 

I  went  to  Cincinnati  to  see  the  bankers  there,  and  tliey  said  they  would  help, 
but  it  did  not  seem  enough,  so  we  sent  wires  to  the  bankers  in  the  Burley  district 
and  had  them  come  to  Lexington.  We  told  them  what  the  Louisville  lawyer  had 
said  and  what  the  answer  was,  and  said,  "Mr.  Brown's  giving  half  a  million.  We 
need  $3,60'0,0'0i0.  What  are  you  men  going  to  do  ?"  The  answer  came  like  a  shot. 
One  little  fellow  got  up  and  said :  "My  bank's  only  a  little  bit  of  a  fellow,  and 
my  legal  limit  is  $3,000,  but  I  will  go  my  legal  limit."  That  made  my  heart  glad. 
Then  Judge  Dingan  got  up  and  said  in  his  personal  capacity,  "I  believe  inthis 
Association,  and  I  know  it  is  right,  and  I- will  give  you  a  million  if  it  is  nceessary.'* 
And  before  we  closed  books  that  day  we  had  $4,300,000  subscribed  for  immediate 
financing. 

And  Still  More  Money  was  Available. 

Then  we  figured  we  had  to  have  more  money  than  that.  (Laughter.)  We 
must  have  120,00'0,00i0  pounds  delivered,  but  we  did  not  want  to  have  to  be  forced 
to  sell  it,  even  if  we  were  sure  we  could  make  sales,  but  we  didn't  want  to  rush 
our  sales.     The  easiest  way  to  make  a  sale  is  to  be  able  to  carrv  your  stuff.     So 


36 

I  went  to  New  York  to  some  of  the  bankers  who  had  been  lending  to  the  California 
farmers.  "Sure,"  they  said ;"  You  get  your  stuff  in  proper  shape  and  in  the  ware- 
houses and  if  your  contract  is  the  right  kind  of  contract  we  will  look  after  you." 
"But,"  they  said,  "don't  go  to  the  War  Finance  Corporation.  We  would  rather  do 
it  for  you."  So  we  wondered  why  they  did  not  want  us  to  go  to  the  War  Finance 
Corporation,  and  we  went  to  see  them  at  Washington,  and  they  said  they  would 
let  us  have  up  to  ten  millions,  at  six  per  cent,  the  money  to  be  taken  any  time  we 
needed  it  and  paid  back  any  time  before  December  this  year,  and  our  security  to 
be  our  warehouse  receipts  the  same  as  at  New  York.  We  have  not  had  to  use  one 
dollar  of  War  Finance  Corporation  money.  But  the  funny  part  is,  the  New  York 
banks  think  Ave  should  borrow  from. them,  the  Chicago  banks  want  some  of  this  busi- 
ness, the  S't.  Louis  banks  want  some  of  this  business.  Why,  the  United  States' 
Banks,  who  used  to  be  absolutely  opposed  to  co-operative  business,  are  now  on  their 
toes  to  get  our  business,  because  they  understand  it  now,  but  chiefly  because  they 
know  that  we  put  our  collateral  before  them.  We  show  the  grade  of  the  product  and 
we  have  it  in  independent  warehouses  and  we  give  them  everything  the  old  dealer 
used  to  give  them  and  a  good  deal  more.  So  our  banking  standpoint  is  fairly 
healthy  in  that  association. 

Then  each  grower  on  the  day  he  delivered,  would  get  a  draft  on  the  Associa- 
tion for  so  much  per  pound,  depending  on  the  grade  he  was  delivering  and  he 
would  deposit  his  draft  on  the  local  bank  and  get  his  money  right  there  and  then, 
and  then  the  bank  would  send  it  in  to  the  Trust  Company  at  Lexington,  not  en- 
dorsed by  any  grower  or  director.  No  one  person  puts  his  personal  credit.  It  is 
simply  the  credit  of  the  Association  on  proper  collateral. 

The  growers  started  to  ship  in  and  it  was  perfectly  wonderful  how  they  rolled 
in  their  stuff.  Then  we  had  to  redry  it.  We  never  parallel  a  man's  plant  if  we 
can  arrange  for  its  use.  We  simply  want  to  make  some  money  for  ourselves,  do- 
ing it,  if  possible,  without  his  losing  anything.  So  we  started  to  make  contracts 
with  re-dryers,  before  we  fin  shed  we  had  a  contract  under  which  we  had  options 
to  go  in  and  re-dry  up  to  eight  million  pounds  a  week,  at  terms  which  were  abso- 
lutely fair  to  us,  and  satisfactory. 

How  the  Selling  Problem  Was  Solved. 

Then  we  said,  "Now,  we'll  talk  about  selling."  So  we  sent  our  cards  to  the 
big  four.  We  sent  our  complete  list  of  grades  and  said  we  would  like  to  have 
them  call  and  see  our  plant.  AVe  called  on  them  personally,  too,  to  show  them 
we  were  not  wild  growers,  but  that  we  were  good  enough  business  men  to  do  busi- 
ness with  them.  We  said  to  one  of  them:  "You  have  2O0'  buyers.  Suppo.>e  we 
can  show  you  where  you  can  send  one  buyer  to  us  and  save  not  only  the  salaries 
of  199  men  but  know  that  you  are  getting  what  you  ask?  Besides."  I  said,  "I 
know  your  buyers  differ,  and  one  firm  had  to  put  18%  of  tobacco  they  could  not 
use  back  on  the  floors  and  sell  it  at  a  distinct  loss  to  themselves.  So,"  I  said, 
"you  can  eliminate  everything  but  just  what  you  want."  They  said,  "That  in- 
terests us.    We  will  look  through  your  grades." 

We  left  them.  Then  we  sent  a  telegram  stating  we  were  ready,  and  the  Vice- 
President  of  Liggett  &  Meyers  came  down  and  saw  Mr.  Stone,  and  he  shot  out 
a  big  order  sheet  and  said:  "Tliis  is  what  we  want,  10(>,0'00  lbs.  of  your  grade  32, 
1  million  200  thousand  poundsi  of  your  grade  D.7,"  and  so  on,  a  total  of  more 
than  20  million  pounds  of  tobacco. 


37 

A  Wakeful  Eye  is  Ever  Necessary. 

Ill  the  meantime  we  had  not  Ixx'U  sleeping.  We  nuuh'  a  suinniarv  from  tlie 
sales  of  Burley  tobacco  made  the  winter  before.  We  knew  that  there  were  other 
smaller  buyer?  in  the  field,  and  we  knew  that  the  big  four  would  bid  big  prices 
to  keep  them  out  of  the  Association,  so  Ave  explained  that  those  sales  would  be  our 
basis  of  sales  and  on  those  sales  we  had  iixed  the  price  which  was  fair  to  the  grow- 
ers. Xow,  Liggett  &  Meyers"  order  included  very  little  of  the  high  grades  but  a 
great  deal  of  the  low  grades.  And  this  was  tobacco  sold  green.  I  am  not  privi- 
leged, to  give  you  the  net  price  we  are  getting  for  the  average,  but  it  is  quite  a 
few  cents  more  than  the  twenty  cents  a  pound  net  for  green  tobacco  to  the  grow- 
ers. I  am  told  you  have  made  good  sales,  or  what  you  call  good  sales.  You  net 
about  eighteen  cents  a  j)0und  to  the  groovers  but  onr  ]>ercentage  on  your  grades 
is  about  six  cents  a  pound  higher  than  yours. 

The  companies  took  delivery  of  the  tobacco,  and  it  began  to  move  out.  Then 
Mr.  Stone  said,  "I  understand  from  the  way  things  are  going  along  t'lat  the  tobacco 
crop  is  going  to  be  short."  So,  after  we  had  sold  about  thirty-six  million  pounds. 
Mr.  Stone  withdrew  the  price  list  and  increased  it.  and  to  date  we  have  sold  about 
fifty-five  million  pounds  of  t(»bacco  at  prices  made  by  the  Association  and  satis- 
factory to  the  Association. 

There  is  a  Time  to  Stop  Selling 

Then  we  closed  down.  We  are  not  selling  a  pound  just  now.  We  are  re-drying 
everx  bit  of  the  toliacco,  'l)ecause  w'e  believe  the  crop  is  rather  short  and  we  are 
not  going  to  sell  another  pound  until  every  delivery  is  in  and  until  we  know 
accurately  what  we  ought  to  charge  for  the  balance  of  the  crop.  Our  guess  is  that 
the  growers  will  net  at  least  ten  cents  a  pound  more  than  the  outside  grower  plans 
to  get  in  Kentucky,  perhai)s  a  little  more  than  what  you  men  have  been  getting 
for  your  Burley  tol)acco  which  you  say  is  as  good  as  ours  and  has  a  larger  pro- 
portion per  acre  and  therefore  costs  you  less  to  produce. 

The  trick  was  turned  in  sixty  days,  without  any  war.  without  any  type  of 
abuse,  with  all  classes  co-operating  with  us.  Mr.  Stone  is  to-day  the  chief  of 
that  industry,  a  high-class  business  man.  He  has  sold  fifty-five  million  pounds. 
We  have  paid  for  every  cent  of  the  original  loan,  and  we  have  not  used  a  penny 
of  the  War  Finance  Corporation's  money,  and  we  are  in  a  good  position  to  sell 
the  balance  of  the  crop  at  what  we  say  is  fair.  Our  growers  are  thoroughly  satis- 
fied, because  the  advance  payment  they  received  this  year  was  about  equal  to  the 
payment  they  got  from  their  entire  crops  last  season,  and  they  know  they  will  i^ei 
about  twice  as  much  again  as  the  advance  payment  which  has  heretofore  been  paid 
to  them. 

The  Lesson  of  one  Brief  Year 

In  short,  in  a  period  less  than  one  calendar  year,  the  entire  Burley  tobacco 
industry  of  the  United  States  has  turned  over  a  new  leaf.  It  has  ceased  to  be  a 
burden  to  the  growers.  This  year  our  growers  will  nud<e  money  on  their  tobacco, 
and  we  believe,  on  the  California  ])recedent,  that  every  year  hereafter  these  grow- 
ers wuU  make  money  on  their  Burley  tobacco. 

The  Burley  men  made  so  well  on  it  that  the  Light  fellows  started.  Now  thev 
have  sixty  thousand  growers  in  North  and  South  Carolina  and  Virginia,  and  that 
Association  is  going  to  run  this  year.  And  there  is  another  Association  for  the 
dark  tobacco  type.     The  next  week   we  put  on   a  big  sign-up  campaign    in   the 


38 

Dark  Tobacco  districts.  1  cxpcH't  in  li'2y  tliere  will  be  about  two  hundred  thou- 
sand growers  of  tobacco  in  the  United  iStates  in  tjiese  three  types  of  Tohacco  Organi- 
zations, and  they  will  handle  about  eighty-five  per  cent,  of  the  Rurley  crop,  about 
seventy-five  per  cent,  of  the  Light  Tobacco  and  something  over  two-thirds  of  the 
Dark  Tobacco  crop  produced  in  that  country.  All  this  was  done  in  a  period  of 
less  than  OJie  year.  Nobody  performed  any  miracle.  They  had  a  good  leader.  Judge 
Dingan. 

A  Leader  is  Nothing  without  Followers 

But  a  leader  is  no  good  unless  he  has  plenty  of  followers.  In  Kentucky  th>iy 
developed  the  followers.  The  growers  decided  they  had  stuck  to  the  buyers  too 
long.  They  threw  it  over  and  in  one  year  they  converted  the  tobacco  business 
from  a  real  gamble  into  a  real  industry.  They  have  done  nothing  yon  cannot 
do  here.  I  know  what  you  have  done  with  your  tobacco  and  your  other  commodi- 
ties .  1  think  your  tobacco  organization  did  a  big  thing  when  they  organized  the 
commodity.  T  think  you  can  make  certain  little  nn'nor  changes  in  your  associa- 
tion and  build  up  an  association  here  that  will  be  just  as  good  for  Canada  as  the 
Burley  Association  has  been  for  Kentucky  and  Tennessee  and  the  other  States 
down  there. 

We  decided  that  we  wouldn't  always  be  at  the  mercy  of  the  big  four,  so  we 
sent  out  notices  to  other  men  who  we  knew  from  time  to  time  bought  tobacco. 
Quite  a  few  of  these  men  are  exporters  of  tobacco  to  Holland,  Denmark,  Sweden, 
and  some  of  it  moves  hy  way  of  those  countries  to  Germany  and  some  to  England. 
We  talked  to  those  men  and  said:  "We  are  going  to  sell  yon  tobacco  on  the  same 
basis  as  we  sold  to  the  big  firms,  T^/iggett  and  Meyers  and  the  others.  We  want 
more  customers.  You  come  out  and  figure  out  what  you  can  do  with  your  E'nglisli, 
Dutch  or  Swedish  trade  and  come  in  and  talk  business  with  ns."  They  came 
and  brought  ns  in  orders  for  one  million  pounds  at  our  prices.  They  are  inde- 
pendent men  who  are  trying  to  grow.  We  have  put  that  industry  on  a  fair,  safe 
foundation  foi-  the  first  time  in  more  than  seventy  years  of  the  tol^acco  industry 
in  those  States. 

Ontario  Tobacco  Conditions  are  Not  Critical 

You  have  a  real  opportunity  here.  Your  iUirley  situation  isn't  by  any  means 
hopeless,  and  even  if  you  are  carrying  your  last  year's  crop,  just  hold  on  to  it  a 
little.  It  is  the  shortest  Burley  crop  they  have  had  in  eight  years,  and  do  not  be 
frightened  when  they  tell  you  they  are  all  stacked  up  with  Burley.  They  have 
to  age  their  tobacco.  They  know  it,  and  you  know  it.  and  if  you  are  businesslike 
and  not  mad.  T  am  of  the  opinion  they  will  deal  with  you  just  as  they  dealt  with 
us  this  year. 

N"ow,  I  have  a  special  message.  I  told  Mr.  Stone  1  was  coming  up  because 
Mr.  Doherty  had  written  me  a  good  survey  of  your  idustries  here,  and  Mr.  Stone 
said.  "Any  time  you  need  anything  from  the  American  Association  it  is  yours. 
(Applause.)  I  will  come  up  here  any  time  you  want  me,  I  will  sit  in  conference 
with  your  Board.  If  you  send  somebody  down  to  talk  real  business  with  me. 
I  will  even  put  you  in  touch  with  some  people  who  can  get  you  foreign  sales. 
You  are  Canadians  and  T  am  an  American,  and  we  fought  together  not  so  long 
ago."  (Applause).  We  are  not  going  to  let  speculators  break  you  men  any  more 
than  we  can  help,  any  more  than  you  would  let  them  break  us  if  you  could  help 
us. 


39 

Ontario  has  Wonderful  Possibilities 

I  cannot  tell  you  how  deeply  I  luive  been  impressed  with  this  Province,  your 
commercial  side,  and  your  wonderful  scope  of  products.  Not  only  have  I  been 
carried  away  by  the  fine  leadership  of  Mr.  Doherty,  your  extraordinary  Ao-ricul- 
tural  College,  but  I  am  very  dee]ily  impressed  with  the  type  of  farmers.  You 
do  not  sit  ahead  of  me,  as  so  many  I'nited  States  farmers  do.  You  have  not  lost 
voiir  hope,  your  eves  are  keen,  and  yoii  arc  still  on  both  feet,  still  ready  and  alilc 
to  take  care  of  yourselves. 

Co-operative  marketing  means  more  money  to  the  farmer,  l)ut  more  than 
that  it  means  a  better  manhood  and  womanhood  and  better  citizenship  in  the  rural 
(districts  of  whatver  State  adopts  it.  We  have  not  done,  in  California,  anything- 
more  than  you  can  do  in  this  Province.  You  have  better  leadership,  and  you  have 
the  example  of  what  California  failed  at.  as  well  as  what  it  has  succeeded  at,  and 
you  have  the  example  of  Kentucky.  You  have  the  finest  type  of  men  to  build 
with,  and  there  is  no  excuse  for  slow  action  in  this  Province,  and  still  less  excuse 
for  any  kind  of  failure.  i\Ien  of  Ontario,  if  you  want  to  make  your  agricultural 
industry  permanent  and  |>rnsperous,  the  whole  world  is  at  your  feet.     (Applause). 


AN   ANALYSIS 
0/ MARKETING 

Fundamental  Principles  of  Co-operation 


=  BY  = 

AARO^^'  SAPIRO 


An  Address  Delivered 
on  December  11,  1923 
at  the  Fifth  Annual 
Meeting  of  the  American 
Farm  Bureau  Federation 
Motel  Sherman,  Chicago,  III. 


Published  by  the 

American  Farm  Bureau  Federation 

58  E.  Washington  St.,  Chicago 


An  Analysis  of  Marketing 

Within  the  last  year  there  has  been  some  real  accomplishment^  in  co- 
operative marketing,  but  the  chief  accomplishment^  is  the  fact  that  around 
the  country  there  is  a  general  clearing  up  of  the  idea  of  what  co-operative 
marketing  means.  We  are  beginning  to  learn  hovir  to  define  the  terms  that 
are  used  in  co-operative  marketing,  and  we  are  beginning  to  make  distinct 
the  viewpoints  that  are  fundamental  in  co-operative  marketing. 

If  I  were  to  have  to  state  what  the  chief  accomplishment  of  the  last 
year  has  been  in  the  entire  subject  of  co-operative  marketing,  or  marketing 
of  farm  products,  I  would  say  that  the  real  achievement  has  been  the  defin- 
ing of  ideas  and  the  setting  out  of  definite  viewpoints. 

I  am  going  to  review  some  of  those  this  morning,  because  there  has 
been  a  haze  of  material  scattered  around  this  city,  and  this  conference,  on 
co-operative  marketing,  and  perhaps  a  mention  of  different  points  will  help 
clear  up  issues  in  our  own  minds  before  this  day  is  over. 

We  are  learning  not  to  merely  use  words,  but  to  analyze  down  behind 
the  words  and  strike  certain  ideas.  The  first  thing  we  are  learning,  for 
example,  is  that  co-operative  marketing  Is  a  totally  distinct  thing  from  co- 
operative manufacturing.  If  you  get  a  lot  of  farmers  together  and  get  them 
to  deliver  all  their  milk  to  one  point,  where  there  is  a  cheese  factory,  and 
then  if  they  own  the  cheese  factory,  or  if  they  lease  a  cheese  factory  and 
engage  a  cheese  maker,  and  then  if  tliey  make  cheese,  that  is  not  co-operative 
marketing,  that  is  co-operative  manufacturing.  Co-operative  marketing 
would  come  only  if  you  took  the  cheese  manufactured  in  these  co-operative 
cheese  factories  and  then  co-ordinated  the  production  of  one  factory  with  the 
production  of  another,  and  made  some  intelligent  arrangement  for  selling  or 
marketing  that  product. 

We  have  learned  to  distinguish  between  co-operative  manufacturing,  co- 
operative buying,  co-operative  packing,  co-operative  grading,  and  co-opera- 
tive marketing  as  such,  and  if  we  can  keep  that  one  distinction  in  our  minds 
we  are  going  to  accomplish  something  real  on  the  entire  matter  of  co-op- 
eration. 

Now  co-operative  marketing  is  distinct  from  all  these  other  activities, 
because  co-operative  marketing  is  simply  an  attempt  to  put  the  business 
principles  of  marketing  into  the  business  end  of  the  farm.  It  has  nothing 
to  do  with  production  except  in  an  indirect  way  in  the  sense  that  production, 
as  to  supply,  affects  marketing.  It  has  nothing  to  do  with  manufacturing, 
except  in  an  indirect  way,  in  that  through  manufacturing  you  get  a  product 
which  is  capable  of  being  sold  or  marketed. 

But  co-operative  marketing  as  such  is  concerned  with  one  thing,  and 
that  is  to  do  intelligent  merchandising  instead  of  dumping  of  a  farm  product. 
The  thought  is  this:  The  farmer  knows  that  he  is  a  good  producer.  In  spite 
of  things  that  have  been  said  out  of  Washington,  the  farmer  is  using  intelli- 
gence in  production.  But  with  all  his  intelligence  in  production,  when  it 
comes  to  actual  selling  or  marketing  of  that  product,  he  finds  himself  fairly 
helpless  to  have  anything  to  say  about  the  price  of  that  product.  And  the 
old  school  says  to  him,  "Supply  and  demand  fixes  that  price,  and  you  can't 
have  anything  to  do  with  it."  And  the  new  school  says  to  the  farmer,  "Sup- 
ply and  demand  does  not  fix  the  price.  There  are  two  movable  things  in 
supply  and  demand,  and  those  movable  factors  are  supply  where,  and  sup- 
ply when, — time  and  place  are  the  two  determining  things  which  fix  price 
value  within  supply  and  demand  of  any  given  product." 

So  we  have  learned  to  teach  the  farmers  that  the  only  way  in  which 
they  can  fundamentally  affect  a  price  is  by  somehow  getting  in  the  position 
where  they  can  control  the  flow  of  the  supply  of  any  given  product  into  the 
markets  of  the  world  at  any  given  time.     Controlling  the  flow  of  the  supply 


cannot  be  done  by  an  individual  farmer,  and  it  cannot  be  done  by  a  single 
local  association,  except  where  the  entire  marketing  problem  is  local.  Con- 
trolling the  flow  of  a  supply  of  the  product  can  only  be  done  where  you  stop 
individual  selling,  which  is  dumping,  and  where  you  substitute  for  dumping 
the  organization  of  that  commodity,  so  that  out  of  some  central  group,  con- 
trolled wholly  and  exclusively  by  the  farmers,  you  can  get  a  control  of  the 
place  and  the  time  and  the  quantity  of  the  flow  of  that  given  supply. 

Now  co-operative  marketing  sets  out  to  control  the  flow  of  supply  as 
to  time,  place,  and  quantity,  and  in  order  to  do  that  it  has  to  stop  individual 
selling.  That  is  the  one  big  thing  we  have  really  learned  in  the  last  few 
years,  that  the  aim  of  co-operative  marketing  is  to  merchandise  in  that  way 
instead  of  dumping  in  the  old  method  of  individual  selling. 

We  have  learned  that  the  farmer,  as  an  individual,  is  a  splendid  pro- 
ducer, but  that  the  farmer,  as  a  merchandiser,  must  meet  his  group  problem 
as  a  group.  Marketing  is  always  a  group  problem.  You  cannot  market  a 
single  thing  under  the  sun  intelligently  unless  you  know  first  what  the 
other  man  is  producing  at  that  time,  what  he  is  moving  into  the  market  into 
which  you  want  to  sell,  and  what  the  absorbing  power  of  all  those  markets 
might  be.  Those  things  depend  on  the  other  fellow,  therefore,  they  are 
group  problems,  and  cannot  be  solved  by  the  individual  farmer  using  his 
own  discretion  as  to  time  and  place  and  method  or  quantity  of  production 
or  sales. 

So  the  big  thing  we  have  found  in  co-operative  marketing  is,  first,  to 
clear  up  the  purpose.  Co-operative  marketing  is  a  system  under  which 
farmers  by  proper  organization,  can  learn  to  merchandise  a  commodity  and 
control  the  flow  of  the  supply  as  to  time,  place  and  quantity,  and  thereby 
have  something  to  do  with  affecting  the  price  value  on  that  product.  Co- 
operative marketing  is  not  the  making'  of  cheese  in  a  co-operative  cheese 
factory.  Co-operative  marketing  is  a  step  which  follows  co-operative  manu- 
facturing. It  is  a  step  which  follows  co-operative  packing  or  co-operative 
receiving,  and  it  is  not  co-operative  marketing  unless  the  aim  is  distinctly 
the  stopping  of  individual  selling  and  dumping,  and  the  substitution  of  mer- 
chandising, control  of  flow  and  supply,  as  to  time  and  place  and  quantity. 

Now  you  know  you  have  often  heard  it  said  that  there  are  six  steps  to 
merchandising.  I  am  just  going  to  name  tlj^  steps  and  then  go  on  to  our 
next  point.  The  steps  in  merchandising  are,  first,  grading, — ^standardizing, 
raising  quality,  branding,   standing  behind  your  brand. 

The  second  step  is  care  of  the  package, — perfecting  the  package  so  it 
not  only  carries  the  commodity,  but  carries  it  in  good  condition,  and  in  the 
unit  that  the  consumer  likes  to  handle. 

The  third  step  is  the  extending  of  markets  by  time  and  by  place, — by 
time  in  that  you  sell  over  a  long  period  instead  of  dumping  in  the  first  sixty 
days  after  harvest;  by  place  in  that  you  study  geography  and  get  the  largest 
possible  distribution  of  that  commodity. 

The  fourth  step  is  increasing  the  use  of  the  commodity,  increasing  the 
use  of  fluid  milk  by  advertising,  for  example,  increasing  the  use  of  any  com- 
modity which  deserves  to  have  its  use  increased  among  consumers. 

The  fifth  step  is  the  control  of  the  actual  flow.  With  perishables  that  is 
a  problem  of  routing,  seeing  that  no  market  gets  a  glut,  and  no  market 
gets  a  famine.  With  non-perishables  it  is  a  question  of  storage  and  finance, 
storage  so  that  you  put  the  non-perishable  in  the  storehouse  or  warehouse, 
borrow  money  on  it  to  the  extent  that  the  farmer  gets  as  much  as  possible 
immediately  upon  delivery,  and  then  keeping  your  period  of  ten  months  or  so 
for  the  orderly  marketing  of  that  commodity. 

The  sixth  step  is  to  make  your  price  depend  upon  the  supply  that  you 
move  into  the  points  of  consumption  instead  of  letting  your  price  depend 
upon  supply  at  points  of  production. 

All  of  those  six  points  are  the  steps  in  merchandising.  Not  a  one  of 
them  can  be  done  by  individual  farmers.  Every  single  one  can  be  done  by 
a  co-operative  that  is  rightly  organized. 

Now  our  whole  aim  in  co-operative  marketing,  then,  is  to  substitute 
merchandising  as  against  the  old  system  of  individual  selling  or  dumping. 


and  merchandising  has  those  six  steps  that  I  outlined  to  you,  not  a  one  of 
which  an  individual  unit  or  an  individual  person  can  accomplish,  and  every 
one  of  which  can  be  accomplished  by  groups  rightly  organized. 

Now  the  second  big  thing  we  have  learned  in  co-operative  marketing  is 
this.  You  have  got  to  keep  your  eye  on  the  particular  commodity.  You 
cannot  organize  strawberries  in  the  same  way  that  you  organize  cotton. 
Each  commodity  must  be  studied  by  itself.  First  you  separate  them  into 
perishables,  then  semi-perishables,  then  non-perishables.  If  it  is  a  perish- 
able, your  problem  is  routing.  If  it  is  a  semi-perishable  like  eggs  or  pota- 
toes, your  problem  is  partly  routing  and  partly  storage  and  finance.  If  it  is 
a  non-perishable  like  wheat  or  cotton,  your  problem  is  wholly  a  problem  of 
storage  and  finance. 

Then  you  have  got  to  study  the  commodity  from  other  viewpoints.  If 
you  are  dealing  in  fluid  milk,  your  unit  of  organization  is  a  metropolitan 
area.  If  you  are  dealing  with  cheese,  your  unit  of  organization  should  be 
the  commodity  as  widely  as  it  is  ranged.  For  example,  with  cheese  you 
would  want  to  take  all  the  co-operative  cheese  factories  in  Wisconsin  and 
federate  them  together  into  one  federation,  and  then  have  that  federation 
join  hands  with  an  Iowa  federation,  a  Minnesota  federation,  an  Illinois  fed- 
eration, so  as  to  get  a  full  commodity  viewpoint  on  cheese.  But  with  milk 
you  would  want  to  organize  milk  as  they  have  done  in  New  York  City,  around 
the  needs  of  that  metropolitan  area,  stretching  the-  organization  back  as  far 
as  any  shipper  ships  milk  for  fluid  use  into  New  York  City. 

You  have  got  to  distinguish  between  beans  that  are  planted  each  year, 
and  prunes,  that  are  raised  on  trees,  that  are  already  there  and  will  produce 
year  after  year.  You  have  got  to  distinguish  between  things  like  pears, 
which  can  be  sold  either  in  fresh  form,  can  be  dried,  can  be  canned,  can  be 
sold  locally  or  shipped  all  the  way  across  the  continent,  distinguish  between 
things  like  that  and  things  like  oranges,  which  are  sold  primarily  in  only  one 
form. 

You  have  got  to  distinguish  between  things  like  tobacco,  which  can  be 
sold  only  to  certain  big  firms,  and  a  few  large  speculators,  and  things  like 
cotton  or  wheat,  which  can  be  sold  at  any  moment  at  some  market  in  the 
world,  at  some  price, — but  can  be  sold,  at  any  moment,  somewhere.  In 
short,  no  matter  what  the  commodity  is,  we  have  learned  that  there  is  no 
universal  rule,  and  no  universal  plan  which  can  be  applied  for  co-operative 
marketing.  You  have  got  to  study  that  commodity  and  you  have  got  to 
study  the  peculiarities  of  that  commodity. 

Take  eggs.  Eggs  in  California  can  be  organized  in  one  easy,  distinct, 
method,  because  your  egg  producers  have  fairly  large  flocks,  standardized 
down  to  white  leghorns,  they  raise  mostly  in-fertile  eggs,  therefore  the  best 
eggs  for  storage,  the  collection  of  the  eggs  is  frequent  and  easy  and  cheap, 
and  the  standardizing,  the  putting  out  of  a  branded  product  is  one  of  the 
easiest  of  all  problems  on  the  Coast. 

Take  your  middle  Western  sections,  where  the  farmer  gives  some  hens 
to  his  wife  and  his  wife  raises  the  hens  for  dual  purposes,  and  she  gets 
brown  eggs  and  she  gets  white  eggs  and  practically  most  of  the  eggs  are 
fertile  eggs,  and  she  gathers  them  in  when  she  pleases,  and  she  doesn't  get 
them  in  case  units.  Why,  your  whole  method  of  organizing  eggs  in  the 
middle  West  will  not  only  be  totally  different  from  the  method  used  in  the 
far  West,  but  the  cost  of  organizing  eggs,  of  actually  making  your  collec- 
tions of  eggs,  of  grading  your  eggs,  and  of  standardizing  your  eggs  and  of 
selling  your  eggs  will  probably  be  three  times  as  great  in  some  of  these 
states  as  it  is  on  the  Pacific  Coast,  where  they  have  these  large,  standardized 
flocks,  and  they  carry  on  egg  production  as  a  primary  work  on  the  farm. 

I  hope  I  make  myself  clear  on  this.  But  what  I  want  to  emphasize  is 
that  every  commodity  must  be  studied  by  itself,  not  only  as  a  specific  com- 
modity, but  under  the  specific  conditions  under  which  it  is  being  produced 
and  being  marketed.  You  have  got  to  study  even  further  than  that.  You 
have  to  study  the  history  of  organization  in  that  particular  area.  If  you 
are  going  into  a  section  where  they  have  had  wrong  methods  of  co-operation, 
where  they  have  confused  co-operative  manufacturing  with  co-operative 
marketing,  where  there  have  been  personalities  who  have  been  absolutely, — 


well,  have  absolutely  embodied  the  wrong  system,  and  suddenly  come  up 
against  a  new  idea  in  co-operative  marketing, — you  cannot  organize  in  the 
same  way,  you  cannot  organize  with  the  same  purpose  in  sight,  that  you  do 
in  districts  where  there  are  either  big  men  or  where  there  is  a  clear  field 
to  work  on. 

In  short,  first,  this  year  we  have  learned  to  define  the  purpose  of  co- 
operative marketing.  Second,  we  have  learned  to  concentrate  attention  on 
the  commodity  as  against  other  commodities,  and  as  against  local  conditions. 
We  have  learned  that  we  have  got  to  analyze  each  particular  thing  in  its  own 
back  yard  and  work  up  the  system  of  organization  around  that  commodity 
under  its  localized  situation. 

Now  the  third  thing  we  have  learned  is  that  we  have  got  to  know  more 
about  the  technique  of  co-operative  marketing.  You  remember  what  they 
always  say, — it  is  not  enough  to  know  where  you  are  going,  you  have  got 
to  have  a  machine  that  can  take  you  there, — and  the  building  of  the  ma- 
chine is  the  technique  of  co-operative  marketing,  and  in  the  last  few  years 
we  have  learned  where  the  farmers  were  weak  in  technique  on  co-operation, 
and  I  believe  that  that  particular  phase  of  it  is  of  real  importance  here,  and 
if  you  will  pardon  the  liberty,  I  am  going  to  go  into  some  phases  of  detail 
on  the  technique. 

The  first  thing  we  have  learned  is  this,  that  you  have  got  to  have  a 
right  law  under  which  you  should  not  merely  incorporate  your  co-operative, 
but  under  which  you  can  stand  on  your  contracts,  know  the  kind  of  con- 
tract that  will  stand,  and  know  the  remedies  under  that  contract,  and  you 
have  got  to  give  your  growers  the  right  to  bind  themselves, — you  don't 
make  them  bind  themselves,  but  if  they  want  to  do  it,  you  have  got  to  give 
them  the  right  to  bind  themselves  as  tightly  as  possible  to  each  other. 

I  want  you  to  know  that  what  I  consider  one  of  the  greatest  Farm 
Bureau  achievements  was  the  fact  that  two  years  ago  the  Texas  Farm  Bu- 
reau Federation  evolved  a  co-operative  marketing  act  and  passed  it  in  the 
Texas  Legislature,  as  a  Farm  Bureau  Federation  activity.  That  law  has 
since  been  copied  by  29  other  states,  so  that  today  in  30  states  of  the  Union 
there  is  a  co-operative  marketing  act  which  absolutely  belongs  to  the  Farm 
Bureau  Federation,  and  which  has  now  been  generally  conceded  as  the 
standard  co-operative  marketing  act  of  the  United  States. 

Then  you  have  got  to  incorporate.  You  must  not  let  farmers  go  ahead 
any  longer  with  unincorporated  groups.  Unincorporated  groups  mean  that 
if  twelve  men  get  together  and  agree  to  do  something  informally,  they  have 
a  co-partners'  liability,  and  if  anything  happens  there,  the  one  out  of  the 
twelve  who  has  any  money  will  be  soaked  for  the  entire  responsibility  or 
obligation  tliat  is  raised. 

Then  we  have  learned  you  have  got  to  organize,  and  must  organize 
locals  to  receive  and  grade  and  store  and  pack  and  manufacture,  but  you 
must  federate  all  these  locals  when  it  comes  to  marketing.  Everything 
that  the  farmers  have  done  in  the  Middle  West  on  the  creation  of  local  ele- 
vators and  local  cheese  factories  and  local  creameries,  everything  they  have 
done  has  been  absolutely  right.  They  needed  those  local  plants,  and  if 
they  had  not  framed  those  local  plants,  they  never  would  have  been  able  to 
get  to  the  point  of  true  co-operative  marketing. 

But  they  did  only  the  first  step.  They  organized  locals  to  receive, 
grade,  store,  manufacture,  and  pack,  but  when  it  comes  to  selling  or  market- 
ing, you  have  got  to  federate  them  all  into  a  commodity  plan, — otherwise 
how  in  the  world  can  you  control  the  flow  of  supply  or  do  anything  which 
fundamentally  affects  the  price? 

Remember,  the  aim  of  co-operative  marketing  is  not  to  fix  prices, — 
that  can't  be  done  unless  you  have  absolute  control  of  an  industry.  The  aim 
is  to  control  flow  of  supply  as  to  time,  place,  and  quantity,  so  that  you  have 
something  to  say  about  the  conditions  that  affect  price  values.  You  cannot 
do  it  as  individuals,  you  cannot  do  it  as  local  units,  but  if  you  take  the  local 
units  and  you  federate  them  from  a  commodity  viewpoint,  then  you  can  do 
something  to  affect  the  price. 

Let  me  give  you  an  illustration.     We  have  got  a  lot  of  apple  co-opera- 

6 


tives  throughout  the  United  States.  Take  in  the  Northwest,  there  is  a  group 
in  the  Wenatchee  Valley,  there  is  another  group  in  the  Yakima  Valley,  two 
in  the  Yakima  Valley,  there  is  a  group  around  the  Willamette  Valley,  another 
in  the  Hood  River,  another  in  the  Roseburg  section, — there  are  several  dis- 
tinct groups  in  the  entire  Northwest  District;  there  are  three  other  groups 
in  California;  there  are  some  groups  in  Michigan;  there  is  a  group  in  Illi- 
nois: there  are  several  groups  in  New  York;  there  are  several  groups  in  New 
England,  and  there  are  some  very  small  groups  in  Virginia,  organized  rightly 
from  local  standpoints.  But  what  happens?  Well,  each  of  these  locals  has 
its  own  general  manager,  and  each  of  these  general  managers  figures  that 
he  is  the  smartest  man  in  the  world  when  it  comes  to  selling  apples,  so  he 
does  not  tell  the  other  man  what  he  is  going  to  do,  he  doesn't  tell  the  other 
man  where  he  is  going  to  ship, — and  here  is  the  result, — -more  than  sixty 
per  cent  of  all  the  apples  handled  by  the  co-operatives  in  the  United  States 
are  sold  in  the  one  city,  in  New  York  City.  More  than  sixty  per  cent, — -al- 
though New  York  represents  less  than  ten  per  cent  of  the  population  of  the 
United  States.  But  the  Yakima  fellows,  the  Wenatchee  fellows,  all  the 
groups  in  the  Northwest,  all  the  groups  in  New  York  State,  lots  of  the 
groups  in  Michigan,  simply  keep  their  eye  on  that  one  single  market  and 
plump  everything  there.  The  result  was  that  about  a  month  ago  they  were 
selling  the  best  boxed  apples,  with  the  biggest  size,  out  of  the  Northwest, 
for  a  dollar  sixty  cents  a  box  on  the  Erie  Pier,  which  would  bring  to  those 
farmers  a  net  of  about  eighty-five  cents  to  ninety  cents  a  box  on  the  best 
apples  that  they  were  sending  out, — apples  which,  because  of  their  culling 
and  their  high  production  cost,  must  have  actually  stood  an  expenditure  to 
them  of  over  two  dollars  a  box  before  they  ever  left  the  Pacific  Coast. 

Why?  Not  because  they  haven't  some  organization,  but  because  they 
haven't  completed  the  organization.  They  are  organized  by  locality,  and  they 
are  doing  fine  grading,  fine  packing,  fine  receiving,  but  when  it  comes  to 
controlling  the  flow  of  the  supply  and  thereby  keeping  the  New  York  market 
from  getting  glutted  and  breaking,  why  they  are  an  absolute  and  complete 
failure,  because  they  have  not  organized  by  the  commodity  instead  of  the 
locality. 

Now  I  want  you  to  remember  that,  because  that  has  now  become  a 
great  current  issue  in  the  Northwest,  and  the  bankers  are  calling  these  men 
in  and  saying  to  them,  "We  are  advising  you,  as  outsiders,  from  the  business 
standpoint,  that  your  method  is  disastrous,  that  all  you  are  doing  is  really 
fooling  yourselves,  that  you  can't  accomplish  a  real  purpose  by  localized 
organization,  and  we,  for  the  sense,  for  the  good  of  the  locality,  for  the  good 
of  the  whole  community,  are  urging  you  men  to  organize  on  the  commodity 
plan." 

Now  that  same  principle  applies  likewise  to  wheat,  applies  to  livestock, 
applies  to  cotton,  applies  to  tobacco,  applies  to  anything  you  mention  under 
the  sun. 

Remember  this.  You  cannot  make  a  price  by  co-operative  marketing. 
But  there  isn't  a  thing  raised  on  the  farm  that  you  cannot  merchandise  more 
profitably  than  you  can  dump.  Now  you  can  dump  either  as  individuals  or 
as  whole  units,  but  in  whichever  way  you  dump,  it  is  still  dumping,  and  you 
break  your  own  price  by  dumping. 

Now  if  you  can  stop  dumping,  first,  by  individuals,  and  second,  by  these 
so-called  local  mass  units,  and  get  a  commodity  viewpoint  and  a  commodity 
organization,  then  you  have  some  chance  to  affect  price  values,  and  you  have 
some  share  in  making  the  price  value  of  your  own  products.  That  is  the 
biggest  thing  to  keep  in  mind  on  the  technique  of  co-operative  marketing. 

Then  you  have  got  to  keep  the  commodities  separated.  You  can  or- 
ganize oranges  in  one  association.  You  can  also  organize  grapefruit  and 
lemons  with  that  association.  But  that  is  because  they  are  related  com- 
modities. But  never  put  a  non-perishable  with  a  perishable,  and  never  put 
two  perishables  together  that  are  sold  into  different  channels  of  trade. 

Let's  take  an  illustration.  The  California  Prune  &  Apricot  Growers' 
Association  handles  prunes  and  dried  apricots.  It  doesn't  handle  one  fresh 
apricot,  because  the  fresh  apricots  are  sold  either  for  the  commission  house 
trade  or   to   the   canners,  and  there   is  a   totally  different   channel   of   trade, 


and  a  totally  different  financial  problem.  Dried  apricots  and  dried  prunes 
are  sold  to  exactly  the  same  persons,  and  have  exactly  the  same  type  of  finan- 
cial problem  to  meet,  so  we  can  combine  them.  But  I  am  told,  for  example, 
that  men  around  are  trying  to  combine  grains  and  livestock  in  one  associa- 
tion. It  is  an  absolutely  fatal  error.  You  cannot  even  combine  corn  and 
wheat  intelligently  in  one  association,  because  they  are  sold  through  differ- 
ent channels,  for  different  uses.  Why,  with  wheat  the  man  who  raises  the 
wheat,  you  know  you  can  compel  him  to  deliver,  you  can  lend  money  on  his 
wheat  when  he  puts  it  into  an  elevator,  you  can  make  him  bring  it  to  the 
elevator,  advance  him  money  against  that.  But  corn,  why  the  man  doesn't 
even  know  whether  he  is  going  to  sell  his  corn  or  whether  he  is  going  to 
feed  his  corn,  so  he  keeps  it  in  his  crib,  and  rightly  so,  until  he  makes  up  his 
mind  which  is  going  to  give  him  the  greatest  return.  You  cannot  borrow 
money  while  the  corn  is  in  his  cribs  on  his  own  farm,  because  you  don't 
know  if  he  is  going  to  be  compelled  to  deliver  or  if  he  is  going  to  have  the 
option  of  feeding  it.  Wherever  you  have  a  commodity  which  differs  in 
channel  of  sale,  or  which  differs  in  financial  problem,  from  another  com- 
modity, never  combine   them  into   one   association. 

Then,  your  associations  must  be  formed  of  farmers  only.  Never  allow 
a  lawyer  in  them,  unless  he  is  a  bona-fide  producer  of  that  commodity.  Just 
farmers,  and  farmers  only.  And  have  the  farmers  who  are  raising  the 
things  that  that  association  is  intending  to  sell.  Don't  have  cotton  men  in 
tobacco  associations.  Don't  have  tobacco  men  in  apple  associations,  unless 
each  man  can  qualify  and  join  that  association  in  the  same  relation  as  every 
other  producer  who  is  in  that  association. 

Don't  be  afraid  to  have  your  people  join  nine  different  associations.  I 
know  one  man  who  is  a  member  of  nine  different  marketing  associations, 
and  in  each  case  each  of  his  nine  commodities  is  being  handled  by  a  special 
commodity  association  that  is  built  around  that  commodity,  and  that  special- 
izes on  the  problems  and  the  marketing  of  that  commodity. 

Then,  you  must  be  democratic  in  control.  One  man,  one  vote,  no  matter 
how  big  you  are  or  how  little  you  are, — one  man — one  vote.  Proxies  ought 
to  be  forbidden  by  law  in  co-operative  marketing  associations.  You  should 
stick  completely  to  one  vote — -one  man,  and  if  the  man  can't  attend  the 
meeting,  then  make  some  arrangement  for  voting  by  mail. 

Then  you  should  teach  them  how  to  district  for  directors.  Never  let 
any  one  section  control  a  directorate.  If  you  have  less  than  5,000  members 
in  a  co-operative,  it  is  best  to  have  direct  elections,  districts  so  that  you  have 
about  five  or  six  hundred  in  a  single  district,  and  have  each  district  elect  a 
director  who  lives  in  that  district  and  grows  his  products  in  that  district. 
Don't  allow  a  system  of  absentee  landlords  to  ever  control  any  co-operative 
association.  Take  men  who  both  live  and  grow  the  commodity  in  the  dis- 
trict that  they  are  chosen  to  represent. 

When  you  get  co-operatives  with  over  5,000  members,  then  you  may 
have  to  use  the  system  of  delegate  voting,  just  as  you  use  in  the  American 
Farm  Bureau  Federation.  Under  that  take  with  our  Burley  Association, — 
we  have  21  districts,  each  district  elects  about  eight  to  ten  delegates;  each 
delegate  represents  about  1,000,000  pounds  of  tobacco;  and  then  those  dele- 
gates select  the  director  from  that  particular  district, — but  he  has  got  to  be 
a  man  who  both  lives  and  grows  Burley  Tobacco  in  that  district.  That  is 
an  example  of  the  delegate  system  of  electing  directors  as  against  the  direct 
system  of  electing  directors. 

But,  in  either  case,  you  start  out  with  a  democratic  control,  one  vote — 
one  man,  with  voting  by  mail  instead  of  proxies,  and  you  end  up  with  dis- 
tricting for  directors,  so  that  no  one  section  can  ever  control. 

The  next  point  in  technique  is  a  point  over  which  there  has  been  much 
controversy.  It  is  the  question  of  contracts.  Let's  give  you  an  illustration 
of  how  our  minds  were  built  up  on  that.  I  remember  in  California  at  one 
time  they  got  a  warehouse  down  near  Stockton  and  organized  a  bean  grow- 
ers association  and  organized  it  on  the  right  lines,  co-operative  lines,  non- 
profit, democratic  control,  and  had  districting  for  directors,  and  they  got 
in  their  Secretary  and  they  set  up  everybody  in  the  place  and  started  in  to 
do  business.     Suddenly  a  man,  a  farmer,  began  to  drive  in  with  a  good,  big 


load  of  beans,  and  when  he  got  near  Stockton  he  was  stopped  on  the  road 
by  the  buyer  for  one  of  the  speculative  concerns  at  San  Francisco.  This 
buyer  said  to  him,  "Where  are  you  going  with  those  beans?" 

He  said,  "I  am  going  to  the  co-operative;  I  am  going  to  deliver  the 
beans  there." 

The  fellow  said,  "How  much  are  they  going  to  give  you  for  those 
beans?" 

He  said,  "I  don't  know,  but  I  guess  I  will  get  around  five  cents  anyhow, 
because  the  market  is  around  five  cents,  but  of  course  you  can't  tell  exactly, 
because  we  are  pooling,  and  you  cannot  tell  exactly  until  the  end  of  the  year. 
But  they  are  giving  us  three  and  one-half  cents  a  pound  as  an  advance 
payment." 

The  buyer  said,  "Let  me  look  at  some  of  those  beans.  Why,  those  are 
wonderful  small  whites.  You  sure  are  a  great  farmer,  John,  you  produce 
wonderful  stuff.  I  will  tell  you  what  we  will  do.  You  have  always  been  a 
good  friend  of  ours,  and  we  have  always  been  a  friend  of  yours.  If  you  will 
sign  a  contract  to  turn  over  all  these  beans  and  all  the  other  beans  that  you 
and  your  tenants  will  raise  this  year  on  your  farm,  we  will  pay  you  six  cents 
a  pound  straight  for  all  those  small  whites,  even  though  the  market  is  only 
five  cents  a  pound  today."'  ■ 

And  you  know  what^happened,  John  would  break  a  leg  to  get  over  there 
and  put  his  John  Henry  on  the  contract  agreeing  to  sell  everything  to  this 
buyer.  Then  what  would  happen  to  the  co-operative?  Why,  your  co-opera- 
tive would  sit  there  all  dressed  up  with  no  place  to  go,  and  in  about  thirty 
days  they  would  have  every  farmer  who  was  driving  in  with  beans  met  on 
the  road,  a  similar  proposition  made  to  him,  and  in  thirty  days  your  co-op- 
erative would  have  to  close  its  doors  and  absolutely  go  out  of  business. 

So  we  learned  there  that  when  you  form  a  co-operative  you  have  got  to 
be  absolutely  sure  that  you  are  going  to  have  something  to  sell.  Co-opera- 
tive spirit  is  one  thing,  but  somebody  might  interfere  with  the  spirit  before 
the  time  comes  for  the  actual  delivery  of  a  commodity.  So  we  use  the  co-op- 
erative spirit  to  have  the  man  sign  a  contract,  and  then  we  say  the  spirit 
will  move  into  the  contract,  and  when  once  the  contract  is  signed,  we  rely 
on  the  spirit  plus  contract.  Remember,  that  spirit  has  even  been  relied  on 
by  the  old-time  co-operatives  that  started  in  to  scoff  at  contracts.  I  will 
show  you  how  they  have  relied  on  it. 

Have  you  ever  read  any  of  these  by-laws  that  these  co-operatives  use? 
Why,  those  by-laws  are  contracts,  they  don't  rely  on  spirit  either.  All  they 
do  is  rely  on  spirit  plus  loose  contracts,  in  by-laws,  and  we  men  have  learned 
to  rely  on  spirit  plus  tight  contracts  that  are  put  out  for  what  they  are, 
namely,  definite,  written,  legal,  valid,  enforceable  agreements  which  state  in 
detail   the  obligation  of  both  parties. 

So  we  have  learned  absolutely  that  co-operation  which  depends  solely 
on  spirit  is  beautiful  but  not  enforceable,  and  that  co-operation  which  de- 
pends on  spirit  plus  contract  is  equally  beautiful  and  more  dependable.  So 
that  is  why  we  now  come  to  the  point  that  most  all  of  the  co-operative 
leaders,  not  only  in  the  United  States,  but  in  Canada  and  Europe,  have  now 
determined,  that  written  contracts  in  some  form  are  essential  for  true  co- 
operation. 

What  is  the  best  form  of  those  contracts?  Why,  there  isn't  any  best 
form.  You  have  got  to  get  the  contract  that  best  suits  the  commodity.  If 
it  is  a  perishable  product,  you  have  no  financial  problem,  you  use  an  ordi- 
nary agency  agreement. 

If  it  is  a  non-perishable,  where  you  have  a  financial  problem,  then  you 
have  got  to  pass  title  to  your  co-operative  under  a  sale  and  re-sale  contract 
so  that  the  co-operative  can  put  the  commodity  into  storage,  get  warehouse 
receipts,  borrow  money  on  those  receipts,  distribute  the  money  immediately 
to  the  farmers,  and  then  do  orderly  marketing  with  that  commodity.  Each 
one  has  got  to  be  studied  by  itself.  In  most  all  cases  the  limit  of  your  con- 
tract should  be  a  state,  because  in  practically  every  big  section  of  the  United 
States  you  will  find  a  situation  where  a  contract  legal  in  one  state  is  abso- 
lutely invalid  or  illegal  in  another  state,  so  the  best  big  unit  is  your  state 

9 


unit,  and  your  contract  should  be  built  up  with  the  laws  of  each  state  in 
mind,  so  that  you  will  know  it  will  be  enforceable  in  every  one  of  those 
states. 

Now  the  pet  contract  of  the  so-called  non-perishable  groups  is  the  pool- 
ing agreement,  under  which  a  man  agrees  to  turn  all  his  cotton  into  a  state 
association;  the  association  agrees  to  grade  and  class  that  cotton  and  then 
to  pool  it  by  grade,  and  then  to  sell  it,  deduct  the  cost  of  doing  business 
only,  no  profits,  and  no  commissions,  and  then  distribute  the  net  returns  so 
that  each  producer  gets  the  same  as  every  other  producer  for  the  same  quan- 
tity, quality,  grade,  staple  length  and  class  of  cotton,  and  the  directors 
have  got  to  be  in  the  sapie  pools  as  the  other  members.  If  he  wants  a  good 
price  for  his  cotton  he  has  to  get  that  very  same  price  for  the  smallest  man 
in  the  entire  association.  If  he  wants  to  put  a  charge  on  the  other  man's 
cotton,  he  has  got  to  put  that  very  same  charge  on  his  own  cotton. 

Now  there  is  a  community  of  interest,  in  which  every  man  has  exactly 
the  same  relationship  to  the  co-operative.  There  can't  be  any  favoritism, 
the  manager  can't  do  a  better  thing  for  the  director  than  he  does  for  the 
smallest  member.  He  cannot  shoot  the  director's  stuff  into  a  high  market 
and  shoot  the  little  man's  stuff  into  a  low  market.  He  has  got  to  recognize 
the  community  of  interest.  And  I  want  to  tell  you  frankly  that  without 
pooling  it  is  all  baby  talk  to  talk  of  merchandising  any  non-perishable 
product,  because  whose  stuff  will  you  hold?  Who  will  you  favor?  Who  will 
you  disfavor  by  shooting  it  into  the  export  markets  as  against  your  local 
market?  With  a  non-perishable  you  cannot  merchandise  unless  you  pool. 
With  a  perishable  that  is  capable  of  exact  grading  the  same  rule  applies; 
either  you  pool  in  contract,  or  you  pool  by  routing  and  get  the  effect  of 
pooling  by  your  routing. 

I  consider  pooling  on  commodities  that  are  non-perishable  or  semi-per- 
ishable in  character  absolutely  the  heart  of  the  entire  co-operative  marketing 
arrangement.  Then  those  contracts  must  be  enforceable.  Contracts  are  not 
ropes  of  sand.  Contracts  are  ropes  of  steel.  If  one  farmer  signs  up  with 
his  fellow  farmer,  it  is  ridiculous  to  talk  about  not  enforcing  the  contracts. 
I  have  heard  a  lot  of  these  farm  leaders  raise  their  brows  and  say  what  a 
terrible  thing  to  make  a  man  keep  his  contract.  Well,  my  God,  every  man 
makes  the  farmer  keep  his  contract  when  the  farmer  signs  a  note  for  pay- 
ment of  money,  when  he  signs  a  mortgage,  when  he  signs  a  deed  of  trust, 
when  he  signs  an  agreement  to  sell  to  the  outsider — everybody  makes  the 
farmer  keep  the  contract.  Why  are  the  contracts  that  are  against  the  farmer 
oh,  so  sacred,  and  the  contracts  that  the  farmer  makes  for  himself,— why 
are  they  to  be  simply  ropes  of  sand?  I  tell  you  that  the  farmer  of  the 
United  States,  when  he  makes  a  contract  with  his  fellow  farmer  and  pools 
with  his  fellow  farmer,  has  the  absolute  moral,  as  well  as  legal,  right  to  get 
complete  enforcement  of  that  contract,  and  we  are  going  to  stick  at  this, 
you  and  I,  between  us,  because  the  Farm  Bureau  Federation  is  the  key  to- 
the  right  law  on  this  subject,  until  every  time  a  farmer  signs  a  contract  with 
his  fellow  farmer  in  a  co-operative,  that  contract  has  got  to  be  upheld,  up 
to  the  top  court  in  the  United  States. 

And  I  will  tell  you  what  has  been  happening.  The  courts  of  the  United 
States  in  the  last  two  years,  barring  my  own  State  of  California,  have  been 
really  acting  with  the  farm  interests  instead  of  against  them.  In  North 
Carolina,  in  Mississippi,  in  Texas,  in  Oregon,  in  Washington,  Wisconsin,  and 
Kansas  in  the  last  year  there  have  been  decisions  holding  not  merely  that 
you  can  get  liquidated  damages,  that  we  can  get  in  practically  every  state 
except  one  in  the  Union,  but  we  can  also  get  injunctions  to  stop  delivery 
outside,  and  get  decrees  for  specific  performance  to  make  the  farmer  deliver 
to  the  co-operative. 

In  California  our  Superior  Court — not  our  Supreme  Court — has  lately 
given  a  decision  that  we  cannot  get  an  injunction,  that,  in  the  face  of  the 
fact  that  we  just  passed  the  Farm  Bureau  Federation  Law  in  California 
which  says  we  shall  get  injunctions  there, — so  we  are  going  up  on  an  appeal 
and  it  is  my  opinion,  privately,  that  we  will  reverse  that  court,  as  we  did  in 
Texas,  and  have  the  Supreme  Court  give  us  complete  enforceable  rights  on 
those  contracts. 

10 


But  I  want  you  to  agree  with  me  on  these  things.  It  is  no  use  asking  a 
farmer  to  sign  a  contract  and  then  have  some  speculative  buyer  show  him 
the  way  to  avoid  that  contract.  If  he  signs  the  contract  with  you  and  you 
sign  it  with  him,  you  know  that,  as  men,  you  want  that  contract  enforced, 
for  his  good,  as  well  as  your  own.  If  you  thought  that  the  contracts  were 
not  enforceable,  you  never  would  have  gone  to  the  trouble  and  expense  of 
ever  building  the  co-operative  in  the  first  place. 

We  are  having  our  troubles  on  enforcing,  but  we  always  and  invariably 
stand  for  enforcement,  and  I  don't  know  a  single  real  co-operative  in  the 
entire  United  States  today  that  doesn't  believe  in  tight  and  complete  enforce- 
ment of  its  contracts  with  its  own  members.  I  have  heard  rumors  of  cer- 
tain farm  leaders  who  are  against  that  type  of  contract,  but  never  any 
such  statement  from  any  co-operative  association  that  is  a  real  co-operative 
in  the  entire  United  States  of  America.  So  bear  that  in  mind.  That  is 
necessary  in  the  technique  of  co-operation. 

Then  there  is  one  other  point,  among  others,  that  is  necessary  to  keep 
in  mind  on  technique.  A  contract  that  doesn't  provide  a  minimum,  without 
which  you  won't  start,  is  a  contract  that  is  going  to  invite  more  trouble  than 
anything  else  under  the  sun.  You  know  all  about  our  troubles  in  California. 
You  know  that  California  has  had  every  single  failure  that  any  other  state  in 
the  Union  has  ever  had,  and  we  have  embodied  every  one  of  those  failures 
in  our  experience.  We  have  done  things  in  twenty  years  which  we  should 
have  done  in  one  year,  if  we  had  enough  intelligence  to  understand  co-opera- 
tive marketing  at  the  start.  But  we  simply  didn't  know,  because  it  hadn't 
been  analyzed  and  hadn't  been  worked  out.  So  we  would  start  along  like 
little  pikers  and  create  a  little  co-operative  and  the  co-operative  wouldn't  be 
able  to  do  more  for  the  farmers  than  any  ordinary  commission  merchant,  and 
then  the  farmers  would  get  dissatisfied  and  would  break  up  the  co-operative, 
and  we  would  stand  there  and  wonder  where  we  had  failed. 

Here  is  where  we  failed.  You  have  got  to  have  a  regular  minimum. 
You  have  got  to  be  certain  of  a  definite  delivery  to  you,  and  that  delivery 
must  be  enough  to  enable  you,  first,  to  pay  your  overhead  for  good  men, 
without  costing  too  much  per  dozen,  too  much  per  bushel,  or  too  much  per 
box.  Second,  you  have  got  to  have  a  large  enough  minimum  so  that  you 
are  an  important  factor  in  that  market  from  the  day  that  you  open  your 
doors.  Merely  being  another  commission  house  isn't  worth  a  single  thing 
to  the  farmer,  although  It  may  mean  some  jobs  to  some  of  the  farmer  repre- 
sentatives. Merely  being  another  thing  doesn't  solve  a  problem.  You  have 
got  to  be  a  different  thing,  and  the  different  thing  that  you  have  to  be  is  a 
unit  which  has  enough  in  quantity  to  make  the  control  of  the  flow  of  that 
supply  really  mean  something. 

I  want  to  say  to  you  point  blank,  there  is  no  fixed  minimum.  Some- 
time it  might  be  thirty  per  cent,  sometimes  it  might  be  fifty  per  cent,  some- 
times it  might  be  seventy-five  per  cent, — the  minimum  must  be  determined 
by  studying  the  commodity  and  its  local  conditions,  but  any  co-operative 
which  forgets  and  starts  without  a  minimum  is  committing  a  fatal  blunder 
right  there,  and  is  either  going  to  take  twenty  years  to  accomplish  what 
could  have  been  done  in  one  year,  or  it  is  headed  straight  for  the  rocks. 
And,  by  the  way,  there  is  really  the  whole  technique  of  co-operative  market- 
ing, all  that  you  need  to  bear  in  mind  as  farm  leaders  when  it  comes  to 
advising  your  own  people  who  rely  and  depend  on  you.  That  is  what  we 
have  learned  of  the  technique  in  the  last  few  years. 

What  is  the  next  thing  we  have  been  defining. — because  I  told  you  the 
accomplishment  in  co-operative  marketing  is  that  we  are  learning  to  define 
ideas?  We  have  learned  we  have  got  to  have  expert  personnel  in  co-opera- 
tive marketing  groups.  We  have  learned  that  a  smooth  tongued  man  who 
can  talk  well  is  the  man  you  must  always  avoid  when  it  comes  to  actually 
trying  to  market  your  product.  We  have  learned  that  a  man  may  be  the  best 
farmer  in  the  world  on  production  and  not  know  a  blamed  thing  under  the 
sun  about  real  merchandising  or  marketing.  We  have  learned  that  you  have 
got  to  get  expert  marketers  to  do  the  technical  job  of  marketing,  you  have 
got  to  get  expert  trafl[ic  men  to  do  the  technical  work  of  transportation,  you 
have  got  to  get  expert  production  men  to  do  all  the  things  that  take  care 

11 


of  the  actual  physical  handling  of  the  commodity.  You  have  got  to  get 
expert  banking  men  to  guide  you  on  the  right  banking  and  financial  chan- 
nels. You  have  got  to  use  experts,  but  the  experts  have  got  to  be  your 
hired  men,  just  as  much  as  the  fellow  who  works  for  four  dollars  a  day  or 
three  and  a  half  a  day  is  your  hired  man  to  help  you  with  production  on 
the  farms.  If  he  doesn't  suit  you,  you  have  got  to  throw  him  out,  but,  in 
each  case  your  aim  is  to  get  an  expert  instead  of  an  amateur  to  run  a  co- 
operative marketing  association. 

You  have  got  to  teach  your  people,  also,  not  to  be  afraid  of  paying  these 
men,  these  technical  men,  high  salaries,  if  you  must,  to  get  them.  Don't 
pay  a  ten  thousand  dollar  man  twenty  thousand  dollars,  and  don't  try  to  get 
a  twenty  thousand  dollar  man  for  five  thousand  dollars.  The  best  invest- 
ment that  the  growers'  co-operatives  can  make  is  technical  men  who  know 
tobacco,  technical  men  who  know  wheat,  technical  men  who  know  cotton, 
technical  men  who  know  apples, — not  lawyers,  technical  men,  who  know 
marketing  and  commodities, — and  if  the  farmers  will  learn  to  spend  some 
of  their  money  directly  for  such  men  instead  of  spending  it  indirectly,  as 
they  are,  to  those  very  men  to  exploit  them,  if  they  will  get  some  of  those 
men  as  their  hired  men  and  have  a  co-operative  rightly  organized,  with  the 
right  aim,  then  I  tell  you  there  is  real  daylight  for  the  farmer,  as  far  as 
marketing  problems  are  concerned  in  the  United  States. 

That  is  really  a  summary, — a  summary  of  the  whole  story  of  co-opera- 
tive marketing  in  the  last  few  years. 

We  have  learned  to  get  rid  of  a  lot  of  fears.  We  have  learned  to  look 
problems  squarely  in  the  face,  and  to  try  to  distinguish  and  make  distinct 
what  co-operative  marketing  tries  to  do,  how  it  tries  to  accomplish  it,  and 
who  it  gets  to  run  the  machines. 

There  are  just  a  few  more  things  I  want  to  bring  out. 

The  Farm  Bureau  Federation  has  a  very  great  work  in  this  respect.  For 
example,  we  are  all  engaged  now  in  trying  to  see  that  the  Federated  Fruit 
&  Vegetable  Growers  gets  a  real  place  in  the  sun.  During  this  year  we 
don't  pretend  that  the  Federated  accomplished  as  much  as  it  is  going  to  ac- 
complish in  the  next  couple  of  years,  because  all  it  was  doing  was  to  find 
out  where  the  problem  is.  We  have  discovered,  for  example,  that  instead  of 
our  spending  our  time  trying  to  sell  apples  for  a  group  of  these  local  associa- 
tions, we  have  got  to  go  out  through  the  American  Farm  Bureau  Federation 
and  get  apples  organized  in  the  United  States  on  a  national  commodity  line, 
organized  in  each  local  point,  federating  the  locals  into  state  organizations, 
federating  the  state  organizations  into  three  big  district  organizations,  then 
federating  and  co-ordinating  those  district  organizations  into  one  national 
apple  growers'  exchange  that  will  sell  through  one  centralized  channel,  will 
export  through  one  centralized  channel,  and  gradually  control  the  flow  of 
those  apples  all  over  the  country,  so  that  no  market  will  be  glutted,  no 
market  will  have  a  famine,  and  so  that  the  farmer  will  not  get  a  net  of 
eighty  cents  a  box  for  apples  that  cost  him  more  than  two  dollars  a  box  to 
produce.  We  are  just  beginning  to  realize  what  the  problem  is,  and  the  first 
thing  to  do  is  to  see  the  problem,  next  is  to  work  out  a  solution  for  the 
problem.  We  are  seeing  the  problem  in  cotton,  we  are  seeing  the  problem 
in  tobacco,  we  are  seeing  the  problem  in  wheat, — separately,  we  are  seeing 
the  problem  in  corn, — separately,  we  are  seeing  the  problem  in  small  grains, 
we  are  seeing  the  problem  in  livestock,  we  are  seeing  the  problem  in  vege- 
tables, we  are  seeing  the  problem  on  potatoes, — separately.  In  short,  we 
are  seeing  our  problems. 

We  won't  solve  those  problems  for  years.  It  is  going  to  take  us  from 
five  to  ten  years  to  take  any  of  the  great  major  commodities  and  actually 
undo  all  the  wrong  system  of  the  last  two  or  three  generations.  But  if  we 
can  take  some  of  the  primary  commodities  in  the  United  States,  and  by  the 
right  type  of  organization  actually  introduce  intelligent  marketing  instead 
of  dumping,  and  if  we  can  do  that  within  a  period  of  five  or  ten  years,  it  Is 
going  to  be  the  greatest  piece  of  permanent  work  that  the  American  Farm 
Bureau  Federation  has  ever  laid  its  strength  and  endorsement  and  personnel 
to  in  its  entire  history. 

12 


Now  our  first  problem  in  all  of  this  is  to  see  the  difficulties,  is  to  see 
the  thing  that  needs  solution.  Our  first  problem  in  all  of  this  is  to  see  the 
thing  that  needs  solution.  That  is  going  to  need  clearness  of  brains,  and 
you  are  not  going  to  have  clearness  of  brains  if  you  come  into  the  subject 
of  co-operative  marketing  loaded  up  with  a  lot  of  prejudice  that  come 
either  out  of  bad  history  or  come  out  of  ill-famed  report,  or  that  come  out 
of  things  which  mean  your  own  personal  lack  of  experience  with  co-opera- 
tive marketing. 

Do  you  know  that  you  can't  do  anything  in  real  co-operation  unless 
there  is  a  real  consecration  of  your  spirit  to  co-operation  yourselves.  Men 
who  go  into  co-operative  marketing  and  have  simply  an  idea  that  "Here  is 
a  chance  to  get  a  job,"  or,  "Here  is  a  chance  to  get  something  for  them- 
selves," those  men  will  die  under  that  work,  because  there  is  no  strain  in 
the  world  like  going  through  the  attacks  that  are  made  on  co-operative  lead- 
ers. Why,  you  think  you  have  seen  attacks  made  on  men?  You  go  read 
what  they  say  about  every  man  who  has  ever  been  engaged  in  co-operative 
marketing.  And  do  the  speculators  make  the  attacks  themselves?  Never. 
They  work  through  their  puppets,  they  work  through  farm  men  who  are 
sincere — -always,- — always  innocent  of  what  is  being  pulled  on  them,  but 
who  nevertheless  do  more  to  destroy  the  work  of  co-operative  marketing 
that  all  the  real  leaders  of  co-operative  marketing  can  build  up  in  ten  years. 

I  want  to  tell  you  that  the  great  danger  today  in  co-operative  marketing 
in  the  United  States  is,  first,  darkness  of  mind  instead  of  clearness  of  brain; 
and  the  second  is  prejudice  instead  of  understanding,  prejudice  instead  of 
courageous  intelligence. 

Now  we  men  who  are  in  this  work,  we  are  not  blind  to  the  things  that 
are  said  of  us,  we  are  not  blind  to  the  things  that  are  not  only  said  of  us  but 
are  written  to  us,  constantly,  under  anonymous  letters,  or  the  things  that  are 
written  to  our  wives  constantly,  under  anonymous  letters.  We  know  that. 
We  know  our  worth,  we  know  our  value,  we  know  that  this  thing  is  right, 
and  that  there  is  no  more  fundamental  work  in  the  United  States  than  true 
co-operative  marketing,  and  all  the  speculative  men  in  the  United  States, 
and  all  their  conscious  or  unconscious  agents  will  not  swerve  one  of  us  from 
the  work  on  which  we  are  engaged. 

I  don't  speak  for  myself,  I  speak  for  the  whole  group.  No  group  of 
men  has  ever  been  humiliated  by  the  type  of  attacks  that  they  have  made 
on  our  group.  But  we  don't  quit,  we  don't  think  it  is  our  need  to  turn  aside 
and  kick  every  dog  who  barks  at  our  heels.  We  pay  no  attention  to  the 
personal  attacks,  but  we  know  them,  and  in  spite  of  knowing  them,  we  still 
go  ahead.  Why?  Because  we  know  this  work  is  right,  we  know  this  work 
is  sound,  we  know  that  the  men  who  are  teaching  the  farmers  true  co-opera- 
tive marketing  are  doing  a  far  greater  service  to  agriculture  than  the  men 
who  have  misled  the  farmers  on  false  co-operative  marketing  for  the  last 
thirty  years.  W^e  know  that  most  of  these  men  have  been  sincere,  we  give 
them  all  credit,  not  only  for  sincerity,  but  for  doing  the  best  that  could 
have  been  done  in  their  day  and  under  their  circumstances.  But  we  grow, 
we  progress,  the  thing  that  was  best  to  do  twenty  years  ago  may  not  be  the 
thing  that  is  best  to  do  today.  And  we  try  to  be  the  interpreters  of  today 
as  well  as  the  analysts  of  yesterday.  We  try  to  be  the  prophets  of  tomorrow 
as  well  as  the  interpreters  of  today,  and,  God  willing,  we  will  stand  in  the 
same  place  and  teach  the  same  things,  and  go  through  the  same  energy,  go 
without  a  day  of  rest  in  nine  years,  to  do  that  same  work  until  death,  and 
not  infancy,  takes  us  out  of  the  field. 

There  is  not  enough  prejudice  in  the  United  States,  there  is  not  enough 
meanness  in  the  United  States  to  overwhelm  the  men  who  are  engaged  in 
co-operative  marketing.  And  I  will  tell  you  why.  You  may  think  in  terms 
just  of  marketing. — but  I  know  that  you  don't,  I  know  that  you  are  seeing 
through  co-operative  marketing,  and  instead  of  seeing  wheat  or  livestock  or 
corn  or  tobacco  or  cotton  or  apples,  you  are  seeing  little  boys  and  girls  on 
the  farms.  So  are  we.  We  see  those  children  growing  up,  either  as  futile 
serfs,  or  as  independent  Americans.  If  we  don't  give  them  a  chance  at  in- 
telligent co-operative  marketing,  they  are  going  down  and  down  in  the 
standards  of  living  on   the  American   farms,   and  the  children   of  American 

13 


agriculture   will  grow   up   weaker   in   soul,   weaker   in   body,   and   weaker    in 
hope,   because  of  our  failure  in  leadership. 

I  tell  you  the  problem  of  co-operative  marketing  is  not  more  money  in 
the  bank,  it  is  more  money  to  spend  on  decent  standards  of  living  in  the 
United  States  of  America, — on  better  schools  and  better  roads  and  better 
teachers,  on  better  churches,  on  all  the  things  that  make  first  for  inde- 
pendence, and  second,  all  the  things  that  make  for  hope  and  social  progress. 
Why,  there  are  not  enough  powers  in  the  United  States  to  stop  the  mouths 
of  the  men  who  intend  that  the  boys  and  girls  on  the  farms  of  this  country 
shall  have  as  good  a  chance  for  a  clean,  hopeful  life  as  the  boys  and  girls 
in  the  most  favored  city  of  this  entire  country. 

Men,  let's  get  together  on  this  work.  No  one  of  us  is  essential, — run 
over  those  of  us  who  are  not  essential,  root  us  out,  if  you  think  we  are  not 
necessary,  but  in  our  place,  if  you  root  us  out,  put  in  yourselves,  and  give 
your  entire  spirit  and  your  entire  soul  to  the  teaching  of  co-operative  market- 
ing. I  tell  you  that  next  to  religion,  next  to  determining  your  relationship 
with  God,  there  is  no  worthier  thing  under  the  sun  to  which  you  can  con- 
secrate yourselves  than  the  work  of  teaching  the  American  farmer  how  to 
pull  himself  up  on  his  own  feet,  how  to  adjust  his  business  to  the  business 
of  the  rest  of  the  community,  how  to  do  by  his  own  efforts  the  things  that 
will  give  him  a  decent  standard  of  living  in  his  home;  how  to  accomplish 
things,  so  that  by  his  own  VN'ork,  his  children  will  stand  with  their  heads  up, 
with  a  chance  for  real  education,  with  hope  in  their  faces  and  become  the 
finest,  cleanest  citizens  in  the  entire  United  States. 

Men,  I  beg  of  you,  stand  with  us  in  this  work  of  building  citizens. 
Keep  the  American  Farm  Bureau  Federation  doing  community  work,  doing 
home  work,  building  up  the  whole  background  of  rural  culture,  and  at  the 
same  time  giving  its  great  leadership  to  intelligent  direction,  so  that  the 
farmers  of  the  United  States,  by  their  own  effort,  can  create  fheir  perma- 
nent prosperity  and  their  own  high  standard  of  living. 
There  is  the  story  of  co-operative  marketing. 


^4^ 


14 


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